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Inter-basin water transfers are widely implemented to counter the uneven geographical distribution of natural water sources. The Big Karun Basin, Iran, has long been of interest to water managers due to its discharge potential, and where several water transfer projects are operated or are under study. This study implements system dynamics modeling (SDM) to the Big Karun Basin consisting of 6 dams, 12 drinking and industrial consumers, 7 fish farmers, 31 agricultural consumers, 5 operational inter-basin water transfer projects, and 7 under-study inter-basin water transfer projects. SDM was applied considering existing inter-basin water transfers. The results show an average annual 8 to 10 billion cubic meters of water is transfered from the Karun River to the Persian Gulf. Part of this flow can be used to meet some of the water demands in the central and eastern basins of Iran subject to accurate social and environmental assessment of impacts. SDM modeling was also implemented accounting for all existing water transfers plus under-study water transfers. The results indicate the firm energy from hydropower produced by the Big Karun Basin system would decrease by 28% relative to existing water transfer conditions. This issue raises concerns given the Big Karun Basin contribution to electricity production Iran. The water supply to several sectors would be marginally impacted by future water tranfers, yet water quality would be compromised in some instances. Therefore, the Big Karun Basin water system was simulated considering inter-basin water governance based on hedging rules for the under-study water transfers. Results indicate the minimum demands of destination basins and source basin (drinking and industrial consumers) couldbe met, the hydropower energy could be generated with a high reliability when implementing inter-basin water governance. The results also indicate the firm energy from hydropower produced by the Big Karun Basin system would decrease by 12% relative to existing water transfer conditions and the vulnerability of the water system would decrease in terms of required quality for downstream demands and water users relative to the full-transfer water condition.