A grid-based real-space implementation of the projector augmented wave sPAWd method of Blöchl fPhys. Rev. B 50, 17953 s1994dg for density functional theory sDFTd calculations is presented. The use of uniform three-dimensional s3Dd real-space grids for representing wave functions, densities, and potentials allows for flexible boundary conditions, efficient multigrid algorithms for solving Poisson and Kohn-Sham equations, and efficient parallelization using simple real-space domain-decomposition. We use the PAW method to perform all-electron calculations in the frozen core approximation, with smooth valence wave functions that can be represented on relatively coarse grids. We demonstrate the accuracy of the method by calculating the atomization energies of 20 small molecules, and the bulk modulus and lattice constants of bulk aluminum. We show that the approach in terms of computational efficiency is comparable to standard plane-wave methods, but the memory requirements are higher.