Globally, water is recognised as a key resource for growing cities and to sustainably increase production of food and energy under threat from climate chance. There is also increasing recognition of the need for more sustainable and transparent management of water resources. Trees and forests, be they cultivated more or less intensively or natural forests in various degrees of degradation and fragmentation, have a central role in water cycling and for protecting water quality. This chapter reviews the role and function of forests in water cycling and management, but also how this knowledge and/or beliefs affect policies and governance of forests with regard to water management. The main objective is to develop a common understanding of the basis of the role of forest management in water governance and a readiness for the diversity of scenarios in a global change perspective on these issues. The chapter gives a short review of the biophysical understanding of forest and water relationships, and also how this leads to different perceptions and policies on the ecological services, or bene?ts, that forests provide. Perceptions of such bene?ts are dependent on a num- ber of factors, including what characteristics of water quality or quantity are desired, and also what are the different dependencies and perceptions of the values provided by the forests themselves, apart from their effects on water resources. In relation to this, descriptions of current and developing governance systems, such as “payment for environmental services” are given. In conjunction, the strong link between the role of trees in soil and water management, and the increasing role of forests for carbon sequestration and climate change adaptation are discussed. Major conclusions include emphasis on preparedness for solutions where forest management is part of water governance in landscape perspectives to meet the needs of many different land users. In this sense, we emphasise that general policies cannot meet sound forest and water governance, but locally/regionally based models and scenarios need to be used as the basis for governance systems. In many parts of the developing world, this puts demand on more empirical data as well as national capacities for research and governance, including transparency and local involvement of stakeholders