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The sustainable management of water resources subjected to the joined influence of transboundary basin-wide dry climatic conditions and intensive man-made river regulations in an upper riparian state on the stream flow regime of a downstream country is a serious challenge. This is particularly the case for arid and semi-arid regions where water resources are limited. The Diyala river basin, shared between Iraq and Iran, was used as an example. The study aims to develop a generic approach to isolate the relative effect of upstream man-made interventions from the mutual impacts of basin-wide dry climate environments and upstream human-induced pressures. The proposed method supports water managers in unbiased, timely and spatially relevant decision-making processes. The streamflow drought index and the monthly-based truncation level were utilized to characterize hydrological droughts, while the standardized precipitation index was used for meteorological drought interpretations. Findings revealed that the upstream river regulation schemes noticeably led to a decline in water availability of the downstream country. The relative impact ranged from a minimum value of 5% in February to the highest value of 54% in July. The average proportional impacts between April and October and between November and March were about 46% and 17%, respectively.