http://www.ajol.info/index.php/wiojms/article/view/28510The Pangani River Basin, with a total area of 43,000 km2 is one of the most important of Tanzania’s river basins. Water and arable land are the most important resources. The water balance in the Basin is estimated at about 900 million m3 per annum. The increasing water demands to meet various socio-economic needs are placing the basin under critical water stress. Irrigation abstraction and evaporative losses at the Nyumba ya Mungu reservoir are the major contributor to the observed water stress in the basin. Deforestation on the highlands and the use of traditional and environmentally unfriendly agricultural practices also have direct impacts on the water retention capability and may significantly contribute to the observed water stress in the basin. In addition, changes in climate regime, due to increasing temperature and reduced rainfall conditions, contribute to the reduced water supply. This coupled with the land degradation problems, has multiple effects on the coastal environments. Management options, using the limited water and land resources more innovatively and sustainably, have been suggested. These options include: 1- reforming the current water rights allocation system, 2- looking for longterm strategies for improving irrigation efficiency, 3- further promotion of innovative agricultural methods and 4- application of modern innovative techniques of water storage such as Aquifer Storage and Recovery (ASR) in preference to surface water storage systems.