Iranian water authority has recently announced that one of the effective ways to avoid unprecedented high water consumption in Iran's agriculture sector is to increase water price. This paper analyzes the feasibility of this policy by using a hydro-economic approach with the aim to consider the role of water pricing in agricultural water management. Such an analysis was conducted through comparing price of water consumed for producing selected agricultural crops (i.e. wheat, sugar beets, onion, tomato, barley, potato, corn, alfalfa hay and watermelon) in a case study on two provinces (East Azarbaijan and West Azarbaijan) in Iran to that in the state of California (CA) in the USA. According to the paper, the method uses the Purchasing Power Parity (PPP) Index for the first time to analyze the water prices of agricultural crops in the case study due to the specific regional circumstances in the Case Study (i.e. severe fluctuations and continuously changing currency) that prevent using the norm of Nominal Exchange Rate Index (NERI). The results show there is no significant difference between the water price for producing the selected crops in West Azarbaijan (W.AZ) and East Azarbaijan (E.AZ) provinces and that in the state of California if PPP Index is applied. Water price for producing each kilogram of some crops such as wheat, sugar beet, onion and watermelon (except potato and barley) is estimated to be between 60 to 80 percent of that in the state of California. However, this ratio is ironically equal to 116% for alfalfa hay and 105% for corn. As a result,