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In this study, Tabriz’s urban water system is modeled using a system dynamics approach. The model is used to simulate conditions in the near future until 2020. The Tabriz SD model considers potential water supply resources (groundwater, imported fresh water, and treated wastewater), potential sources of demand for water resources (domestic, irrigation and industry uses) and management tools (wastewater reuse and recycling, inter-basin water transfer, water price and conservation tools). Domestic price is varied so its effect on the water shortage could be determined. The model also analyses the effect of expanding the wastewater network on groundwater resources. According to the study results, both inter-basin water transfer and demand management tools reduce the water shortage up to 45% in 2020 but water transfer is more effective. The model has proven to be useful for Tabriz’s water authorities, and its methodology is applicable to other cities, especially those in arid or semi-arid regions. (C) 2011 Elsevier B.V. All rights reserved.