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Iran is currently experiencing serious water problems. Frequent droughts coupled with over-abstraction of surface and groundwater through a large network of hydraulic infrastructure and deep wells have escalated the nation’s water situation to a critical level. This is evidenced by drying lakes, rivers and wetlands, declining groundwater levels, land subsidence, water quality degradation, soil erosion, desertification and more frequent dust storms. This paper overviews the major drivers of Iran’s water problems. It is argued that while climatic changes and economic sanctions are commonly blamed as the main drivers of water problems, Iran is mainly suffering from a socio-economic droughti.e. water bankruptcy, where water demand exceeds the natural water supply. In theory, this problem can be resolved by re-establishing the balance between water supply and demand through developing additional sources of water supply and implementing aggressive water demand reduction plans. Nevertheless, the current structure of the water governance system in Iran and the absence of a comprehensive understanding of the root causes of the problem leave minimal hope of developing sustainable solutions to Iran’s unprecedented water problems.