Water is a constrained natural resource and in many areas of the planet water shortage is considered to be one of the most important issues to be resolved. This is certainly true for many Greek islands, where there is serious water shortage especially during the summer, thus hindering the development of the islands. The aim of the present work is to propose a method for the optimisation of water systems, i.e. the optimal water supply and distribution under conditions of water shortage, as they appear in the Aegean islands. In the water systems under consideration, the total demand as expressed by the users may exceed water availability. In this case, priorities between conflicting demands need to be taken into account. More specifically, the work describes the mathematical model that has been developed for the optimal allocation of water to various users from different sources with varying supply costs and water use values. Technical and environmental parameters are taken into account in the optimisation problem. Special emphasis is given to the implementation of the method in specific Aegean islands with water shortage. The novel feature of the work lies in the fact that it proposes an integrated framework for the solution of water resources optimisation, taking into account various problem parameters and thus resulting in important conclusions concerning supply sources, required infrastructure projects, water cost and value creating from the exploitation of water resources. (C) 2009 Elsevier B.V. All rights reserved.