The Indonesian water resources sector has been subject to reforms in recent years. The most significant of these reforms is the new water law adopted in 2004. This law reflects the principles of IWRM and represents a shift from previous development oriented towards more water management-oriented practices. Implementation of this law is quite challenging, as the capacity of organizations to undertake the required tasks is often missing. The capacity needs facing the water sector in Indonesia are two-fold. On the one hand, new skills are needed to address the challenges brought on by the reforms, which emphasizes a shift from development of new facilities and infrastructure to management of existing infrastructure, and from specific users to management of the whole cycle from source to users. On the other hand, the sector is facing enormous challenges resulting from the consequences of a decade- long zero-hiring policy. Whilst capacity needs are severe, the (institutional) mechanism in Indonesia to address these needs does not yet appear to be in place. For these needs to be addressed, action has to be taken at both the sector level (such as changes in university curricula and increasing coordination in the sector) and at the organizational level (such as developing better human resources management practices).