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This chapter provides an overview of the different legal, administrative and economic factors that provide the institutional context for water manage- ment in Spain, focusing on the effects of the 2000 European Water Framework Directive (WFD). At present and partially due to the WFD implementation process, the Spanish water sector is experiencing a slow transition from old to new water paradigms. Highlights in this sense are the consideration of the achievement of ecological quality as a primary planning and management objective; an increase in public participation and transparency in water-related decision processes; the economic analysis of water services; and an increased emphasis on water demand management. The achievement of the WFD objectives faces several challenges and uncertainties that are of technical, financial and political nature. However, possibly the key to a successful implementation of the WFD and a real shift of paradigm lays in strengthening the link between land use and water management and in creating institutional structures that facilitate co-responsibility and full cooperation between the central state and the regions, who hold most of the responsibilities on land use management.