Increasing policy support for community-based natural resources management and institutional redesign has been followed by questioning of the feasibility, risks, and results of such approaches. The application of participatory approaches for improving basin-scale water governance would benefit from reconsideration in light of critical analysis of community-based natural resources management and institutional design principles for common-property resource management. Problems of pervasive politics and contextual contingency indicate the need for revising assumptions and expectations. A community perspective on the application of institutional design principles suggests distinct priorities from current policies for improving basin water allocation. Measures to support community involvement in basin water governance, such as legislative reform, legal empowerment, networking, advocacy, participatory planning, technical advice, and facilitation, may be more effective if fitted to community priorities in negotiating rights to water. Key words: water rights, water allocation institutions, river basin governance, integrated water resources management, community-based natural resources management, institutional design principles.