Population growth, increasing droughts, and high irrigation needs are all factors that create freshwater shortage problems on islands. The pressing needs of remote islands usually call for water transport from the mainland or other neighboring islands, at a high cost. This study evaluates the design and economic viability of an alternative, sustainable water supply network on the Mediterranean island of Skyros in Greece. The proposed water supply system provides the island with potable water from desalination units, as well as water for agricultural use from a wastewater treatment plant. The total investment cost of the project is found to be €9.8 million, accounting for the cost of transportation of the water between the different settlements (installation, operations, and maintenance), as well as for the required energy of the involved methods. It is found that 44% of the expenses are related to the transport of potable and residual water, and 52% of the cost corresponds to the production of the required desalinated water. As part of a sustainable water and energy network, all energy needs of water generation are assumed to be covered by a renewable power plant. The total cost of water generation on the island with the proposed system is estimated at 2.49€/m3, constituting a competitive and more sustainable solution, when compared to current practices.