Brazil is currently facing the challenge of implementing a new water resour
ces management system to promote the rational and sustainable use of the co
untry's waters. This system is based on the following principles of water m
anagement: (2) stakeholders' participation; (2) the watershed as the planni
ng and management unit; and (3) the economic value of water. Stakeholders'
participation and the involvement of civil society in the decision making p
rocess is guaranteed by permanent seats in the watersheds' management commi
ttees. These committees are the highest decision level for the establishmen
t of water policy and for planning its use. The executive branch of the com
mittees is the watershed agency or the water agency. This paper presents th
e recently approved Brazilian water resources management system and discuss
es the participatory approach followed to validate and to ensure prompt res
ponse to decisions regarding water use by all stakeholders. The formulation
of the National Water Law (January/1998) was also supported by extensive c
onsultation with civil society, professional associations, state and munici
pal governments as well as with federal governmental agencies and private s
ector organizations. It also presents an overview of the formulation of the
National Water Law. Finally, as watershed committees have been created and
are already operating in a limited number of watersheds, same of the major
obstacles to the success of the new system are discussed along with altern
atives for overcoming such obstacles.