The scarcity of natural water resources and the growing gap between demand and available supply of potable water in most countries of the Gulf Cooperation Council (GCC) force them to face their water challenge with wise policies and plans. This paper highlights some of the water challenges facing the Gulf region and recommends some key policies and programs to turn these challenges into opportunities. Maintaining economic prosperity with limited water supply, finding enough capital to increase supply, mastering advanced water technologies, securing supplies under all conditions, reducing negative impact to the environment, and coordinating the efforts of existing water institutions are only some of the challenges facing the Gulf region. The key policies recommended include establishing regional water plans, reducing water subsidies, creating competition in water supply, increasing water supply options for both short and long terms, developing a local industrial base in desalination and other advanced water related technologies, and reducing the current waste in water use. Some specific programs to implement above policies are outlined. They include having government water organizations buy water through competitive market pricing, establishing a GCC fund for developing water technologies under the GCC General Secretariat, securing strategic water reserves, building a regional water pipeline network and making water conservation a duty for all users and sectors. © 1990.