Providing reliable public water service is a big challenge in Indonesia, especially for small cities, due to various constraints such as budget, regulation, and technical problems. Besides, people’s preferences play a significant role in domestic water utilization. This research particularly aims to identify factors influencing public preferences for domestic water use in Kota Metro, Lampung Province, Indonesia to find the reason why public water service is less preferable in this city. We did a household survey and performed a multinomial logistic regression and multiple correspondence analysis to investigate the preferable domestic water source and influential factors determining the choice. We found that accessibility and water quality are the two strongest motives in choosing domestic water use. Our analysis also shows that the respondent’s choice is influenced by his or her income, family size, and proximity to the pipe network. Subsequently, we synthesized our empirical findings and the existing situation of the domestic water fulfillment in Kota Metro to suggest an improvement proposal inspired by the circular economy concepts. We recommend a mixture of a pipe water service and community-based water management to improve the current domestic water fulfillment.