A real-time operational methodology has been developed for multipurpose reservoiroperation for irrigation and hydropower generation with application to the Bhadra reservoir system in the state of Karnataka, India. The methodology consists of three phases of computer modelling. In the first phase, the optimal release policy for a given initial storage and inflow is determined using a stochasticdynamic programming (SDP) model. Streamflowforecasting using an adaptive AutoRegressive Integrated Moving Average (ARIMA) model constitutes the second phase. A real-time simulationmodel is developed in the third phase using the forecast inflows of phase 2 and the operating policy of phase 1. A comparison of the optimal monthly real-time operation with the historical operation demonstrates the relevance, applicability and the relative advantage ofthe proposed methodology. © 1990 Taylor and Francis Group, LLC.