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Estimation of reference evapotranspiration (ET0) in urban areas is challenging but essential in arid urban climates. To evaluate ET0 in an urban environment and non‐urban areas, air temperature and relative humidity were measured at five different sites across the arid city of Isfahan, Iran, over 4 years. Wind speed and sunshine hours were obtained from an urban surrounding weather station over the same period and used to estimate ET0. Calculated ET0 was compared with satellite‐based ET0 retrieved from the MOD16A2 PET product. Although MODIS PET was strongly correlated with the Valiantzas equation, it overestimated ET0 and showed average accuracy (r = 0.93–0.94, RMSE = 1.18–1.28 mm/day, MBE = 0.73–0.84 mm/day). The highest ET0 differences between an urban green space and a non‐urban area were 1.1 and 0.87 mm/day, which were estimated by ground measurements and MODIS PET, respectively. The sensitivity of ET0 to wind speed and sunshine hours indicated a significant effect on cumulative ET0 at urban sites compared to the non‐urban site, which has a considerable impact on the amount of irrigation required in those areas. Although MODIS PET requires improvement to accurately reflect field level microclimate conditions affecting ET0, it is beneficial to hydrological applications and water resource managers especially in areas where data is limited. In addition, our results indicated that using limited data methods or meteorological data from regional weather stations, leads to incorrect estimation of ET0 in urban areas. Therefore, decision‐makers and urban planners should consider the importance of precisely estimating ET0 to optimize management of urban green space irrigation, especially in arid and semi‐arid climates such as the city of Isfahan.

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