Water vapor plays an important role in many aspects of the climate system, by affecting radiation, cloud formation, atmospheric chemistry and dynamics. Even the low stratospheric water vapor content provides an important climate feedback, but current climate models show a substantial moist bias in the lowermost stratosphere. Here we report crucial sensitivity of the atmospheric circulation in the stratosphere and troposphere to the abundance of water vapor in the lowermost stratosphere. We show from a mechanistic climate model experiment and inter-model variability that lowermost stratospheric water vapor decreases local temperatures, and thereby causes an upward and poleward shift of subtropical jets, a strengthening of the stratospheric circulation, a poleward shift of the tropospheric eddy-driven jet and regional climate impacts. The mechanistic model experiment in combination with atmospheric observations further shows that the prevailing moist bias in current models is likely caused by the transport scheme, and can be alleviated by employing a less diffusive Lagrangian scheme. The related effects on atmospheric circulation are of similar magnitude as climate change effects. Hence, lowermost stratospheric water vapor exerts a first order effect on atmospheric circulation and improving its representation in models offers promising prospects for future research.