For over a century, Idaho has managed its water resources pursuant to the "prior appropriation" system. Idaho's Constitution declares the state's waters to be a public resource, albeit a public resource in which private rights to use water may be obtained through an appropriation. To appropriate water in Idaho, a potential user must complete an application process with the Idaho Department of Water Resources (IDWR) and put the water to beneficial use. In times of shortage, Idaho rations scarce water resources using the "first in time, first in right" principle. Idaho's water appropriation system is governed by Idaho's statutes as well as comprehensive administrative regulations.

Two organizations oversee the important task of managing Idaho's water resources. The IDWR is responsible for regulating the use and appropriation of surface and groundwater water rights, protecting the state's stream channels, flood plains, and groundwater, and conducting safety inspections on Idaho's dams. The Idaho Water Resources Board (IWRB) is responsible for developing Idaho's water policy. The IWRB develops and implements the state water plan, administers grants for water infrastructure development, appropriates minimum in-stream flows, and manages a state "water supply bank."

To appropriate water in Idaho, a party must submit an application and receive a permit from the IDWR (except for exempted single family domestic wells and in-stream livestock watering). When an IDWR hearing officer determines that an application meets statutory requirements, the Department issues a permit. After the permit holder develops the project and shows proof of beneficial use of the water, IDWR issues a license that describes the completed appropriation. Parties whose applications for appropriations are denied by the IDWR hearing officer may request a hearing in front of the Department Director. Judicial review can be obtained for final decisions of the IDWR. A decision of the IDWR will be upheld by a court if it is supported by substantial evidence in the administrative record.