This article examines the effects of U.S. federal farm programs on agricultural water use, water quality, and the allocation of water between agriculture and other sectors of the economy. Agriculture is central to policy debates over how to allocate water between competing uses and how to control water pollution. Agriculture accounts for 80% of U.S. consumptive use of freshwater and has been identified as the largest contributor to nonpoint source water pollution. Over the last 20 years, agricultural policy reforms have greatly reduced, though not eliminated, incentives to overuse water and chemical inputs and have improved targeting of conservation programs to achieve environmental benefits. Recent changes provide greater incentives for voluntary reallocation of water from agriculture to other uses. The 2002 farm bill reverses some reforms, increasing some distortionary subsidies, while shifting conservation program priorities from environmental to income transfer objectives.