Water-sharing in a river basin by different users as well as between different stakeholders along the river basin has been a serious problem and becomes more complex when there is an acute shortage of supply in the river basin. Many negotiations and interactions take place between the farmers as well as between the watersupplier and the farmers before the actual water allocation takes place. This paper presents a novel approach of agent based modeling for solving the water allocation problem. Agent based modeling using a multi-agent approach has been used to represent the various interactions between stakeholders during the process of water allocation. The spatial multi-agent programming model has been used for assessing the performance of the water allocation strategies. It is found that the developed model could provide the various possible scenarios and their consequences to the decision makers. The developed model is very generic and consists of a group of farmers with different farm sizes and crops, and a water supplier who does the allocation. The water allocation rules are built into the functioning of the models and are used to evaluate the performance of the developed rules. The performance indicators adopted in this model include individual farmers view point where one could observe the water needs and water allocated per unit area, global viewpoint with the overall yield, and the ethical viewpoint with disparities in water allocation and yields. It is found that the developed model has been proved to be successful to evolve a compromise and effective solution for the water allocation problem, when the model was applied to a case-study in Tamilnadu, India. © 2009 ASCE.