Focus group discussions and a modeling approach were applied to determine policy and regulatory refinements for current water allocation practices in Kyrgyzstan. Lessons from the Lower Colorado River basin, Texas and New South Wales, Australia were taken into consideration. The paper analyzes the impact of adopting some of these interventions within the socio-environmental context that currently prevails in Kyrgyzstan. The optimization model for water distribution at the river-basin scale was developed using GAMS 2.25 software. Application of the model to the Akbura River basin indicated efficiencies in the proposed institutional rules especially in low water years.