The Australian government’s acceptance of global climate change as a critical pressure on our nation’s water supplies has created the need to develop an effective framework for water governance within Australia. Effective water governance is rapidly becoming an imperative, particularly in Australia’s many drought-ravaged regional areas. Such regions are experiencing significant tensions due to the competing water needs required to support industrial growth; provide for the growing demands of agriculture and urban populations; and to address emerging environmental challenges. These issues are further complicated by the significant decline in water supplies that is being driven in part by climate change, together with the need to address water use efficiencies and to develop water recycling strategies. This complex web of competing water interests has not been dealt with satisfactorily under the current Australian regulatory mechanisms. Instead, the present legislative controls appear confusing and overly complex, with little opportunity for local input and influence. Subsequently, there is a pressing need to simplify and rationalize existing institutional arrangements and to enable greater participation in water management at the regional level. Regional water governance is emerging as a global concern, particularly with respect to the new ‘trilemma’ – a situation created by tensions between effectiveness, participation and legitimacy. The effective and equitable distribution of water within Australia’s regional areas is becoming increasingly contested and is impacting upon these regions economically, environmentally and socially. Regional Governance Agreements (RGAs) can provide useful tools to address the multiplicity of issues that impact upon the management of water sheds in regional Australia, including concerns about increasing competition for water and issues of equity, price, reliability and highest value use. This paper reports on a succinct literature review and the findings of industry and community consultation with respect to water governance in regional areas. It describes the pressures on water governance in the context of global climate change and explores the strengths of taking a regional governance approach to water management, using central Queensland as a case study.