Since 1999, Israel has secured a decoupling between the total water supplied and water derived from the natural environment through surface and groundwater. Between 2007 and 2010, this decoupling enabled a cut of over 20% in natural water use, while maintaining overall supply volumes despite drought. By 2009–2010, natural water supply had been reduced to the levels of the early 1960s. As seawater desalination contributed less than 10% to the total supply up to 2009, decoupling was achieved primarily through cross-sector efficiency and the recycling of urban effluent. This study uses the case of Israel to exemplify the challenges faced by semi-arid economies in achieving a gap between the upward trend in total national water use and local water withdrawn from natural resources. Decoupling will be shown to comprise two types. One type occurs when an economy ceases to be water self-sufficient. Another type is encountered when an economy has the capacity to remedy its over-exploitation of natural water. It will be shown that the first decoupling is non-contentious and non-politicised. The investments and reforms needed to bring about the second decoupling appear very demanding economically and very politically stressful.