The Tarim River is the major water source for all kinds of human activities and for the natural ecosystems in the Tarim Basin, Xinjiang, China. The major water consumer is irrigation agriculture, mainly cotton. As the area under irrigation has been increasing ever since the 1950s, the lower and middle reaches of the Tarim are suffering from a water shortage. Within the framework of the Water Law and two World Bank projects, the Tarim River Basin Water Resource Commission was founded in 1997 in order to foster integrated water resource management along the Tarim River. Water quotas were fixed for the water utilization along the upstream and downstream river stretches. Furthermore, along each river stretch, quotas were set for water withdrawal by agriculture and industry and the amount of water to remain for the natural ecosystems (environmental flow). Furthermore, huge investments were undertaken in order to increase irrigation effectiveness and restore the lower reaches of the Tarim River. Still, a regular water supply for water consumers along the Tarim River cannot be ensured. This paper thus introduces the hydrology of the Tarim River and its impacts on land use and natural ecosystems along its banks. The water administration in the Tarim Basin and the water allocation plan are elaborated upon, and the current water supply situation is discussed. Finally, the adaptations made due to issues of water allocation and water scarcity on the farm level are investigated and discussed.