Australian rice growers are under considerable pressure to increase water use efficiency to remain profitable and avoid soil salinisation. In particular, profitability is threatened by decreasing water availability and certainty of supply and by increasing water price, as a result of environmental and National Competition Policy agendas. Field irrigation water productivity has more than doubled in the past 20 years from an average of around 0.34 g paddy rice per kg water to around 0.77 g kg'1, largely due to increased yield from the development and adoption of improved varieties and management strategies, and to a lesser degree due to the introduction of rice water use and soil suitability policies. Future increases in rice field water productivity will come from greater yields through breeding for increased cold tolerance, precision agriculture and improved crop establishment, and from reduced water use due to reduced duration of ponding. A key challenge of the next decade will be to increase cold tolerance to the extent that deep water ponding for low temperature protection is no longer required, possibly allowing a complete shift away from ponded culture and reducing irrigation water requirement. While increasing the water productivity of rice is important, water productivity and profitability of the entire cropping system is of ultimate importance. Growing winter crops after rice and permanent bed systems offer potential benefits of increased productivity of crops traditionally grown in rotation with rice and increased cropping diversity and flexibility. Irrigation water productivity is also being improved through on-farm and regional technologies such as on-farm recycling systems and automatic data acquisition and control systems in irrigation supply systems. To increase water use efficiency and achieve sustainability of rice-based farming systems in Australia, irrigation communities are implementing a range of on-farm and regional technologies andpolicies. An integrated approach is required to evaluate options, prioritise investments, maximise economic returns, guide policy and balance the environmental demands of river ecosystems with the needs of irrigated agriculture and its dependent regional communities. Significant progress is being made, through the development and application of farm and irrigation area hydrologic models linked with production models and economics, combined with strong stakeholder participation. The progress in integrating science, people and policy makers was recognised in 2002 by the award of the first 'Reference' catchment status to the lower Murrumbidgee catchment, a major Australian rice-growing region, under the UNESCO/WMO HELP (Hydrology for Environment, Life and Policy) program.