One of the main elements of sustainable water governance is implementing an efficient water allocation and entitlement mechanism. Developing and establishing a coherent, participatory water allocation system that balances water supply and demand while utilizing resources according to their ecological capacity and potential is essential for effective water resource management. The increase in the country's population, combined with inadequate water consumption management and a lack of decrease in per capita water consumption in recent decades, has significantly heightened pressure on the country's water resources and ecosystems. Currently, the ratio of water withdrawal to renewable water resources in the country stands at 86%, indicating high water stress. This figure is projected to drop to 69% under future conditions, based on available water resources and assuming effective consumption management. This ratio is 9 and 7.5 times the global average, in the current condition and with the implementation of water consumption management in the future, respectively. The high potential for water consumption is a source of many environmental problems, as well as political and social tensions in the country. This article, while explaining the fundamentals and planning of water allocation, addresses its challenges in various areas, including 1) political and organizational, 2) technical, 3) social and cultural, 4) economic, and 5) environmental.