The water conflict between Israelis and Palestinians is a key element of the wider political feud between the two parties, and its resolution is essential for a final peace accord. The main source of water for both Israelis and Palestinians is the shared Mountain and Coastal Aquifers. These aquifers have suffered significant degradation as a result of mismanagement and overexploitation during the past several decades. This degradation has had harmful effects on both the Israeli and Palestinian populations, and will influence the long-term capacity of the aquifers. Most Israeli and Palestinian water professionals agree that it is necessary to devise a mutually acceptable solution for jointly allocating, managing, and monitoring their shared water resources. The main outstanding question is what the comonents of this agreement will be. In this report, I argue that if a fair and satisfactory solution is to be reached, Israelis and Palestinians will have to first reallocate their water resources, and then build an adequate joint management regime.