Introduction Integrated transboundary water management is a sine qua non condition for sustainable development in the Central Asian states, which are highly dependent on irrigated agriculture. Elsewhere we have discussed at length the consequences of intensive cotton production, increased water use and the drying-up of the Aral Sea (Krutov 1999; Spoor 1993, 1998, 2000; Spoor and Krutov 2004). However, more detailed analysis is needed on the river basins which are part and parcel of the Aral Sea basin, where problems of transboundary water management, national versus regional water institutions, and pressures from various sectors for water are becoming apparent. Although its total land area is vast, arable land in Central Asia is scarce. Available water resources are subject to increased demands from upstream and downstream countries, and between agricultural and hydropower use (Spoor and Krutov 2004). Furthermore, many of the current water management institutions and organizations are still similar to those in Soviet times. Since the transition period after 1991, much of the agricultural sector has been individualized and sometimes privatized (Spoor 2004, 2007; Lerman 2007). While many of the production risks and benefits have shifted from the state to the individual producer, the latter hardly receives economic incentives (or sanctions) to pursue a micro-level behaviour towards a level of efficiency that suits this most precious resource. This chapter looks to integrated water management and institutional change (Saleth and Dinar 2000, 2004) in two important transboundary river basins, namely the Chu-Talas basin, which is shared by Kyrgyz Republic and Kazakhstan, and the Vakhsh-Amu Darya basin, shared by Tajikistan, Turkmenistan and Uzbekistan. It concludes that in the former case there is some progress in interstate cooperation and joint allocation of water, with the richer downstream country (Kazakhstan) now investing in and co-financing upstream irrigation systems, as a form of payment for environmental services (PES). In contrast, the latter case is still filled with potential conflicts and tensions over water, which is primarily used for cotton production in all three countries, and the often opposing target of increasing hydropower generation in the upstream country, Tajikistan (see also Spoor and Krutov 2004).