Data from a dual-frequency GPS network operated continuously from May 1998-October 1999 on Taal volcano, Philippines, were processed on a daily basis to monitor processes of crustal deformation associated with volcanic activity. During the 16-month period of observations, displacements totaled nearly 30 mm in the horizontal and 50 mm in the vertical over 2.7 and 5.8 km baselines. Relative site velocities, estimated from daily site coordinates using 60-day tapered windows, vary significantly and can exceed 150 mm yr -1 in the horizontal. Velocity estimates were used to invert for parameters of a point-source model of elastic strain. During periods in which velocities are significant, the motions have a localized source at very high confidence, and the source magnitude term fluctuates between inflationary and deflationary behavior on time scales of weeks to months. The largest site velocities (and corresponding deformation model parameters) are time-correlative with anomalous bursts of hydrothermal activity and high-frequency local seismicity. In each instance the onset of deformation precedes both seismicity and hydrothermal activity, and the hydrothermal event coincides with a rapid shift in the velocity behavior. The relative timing of these phenomena suggests that deformation and seismicity both are responding to punctuated migration of hydrothermal fluids.