Urban and rural areas often meet their water demands from a shared stock of finite water resources. Against the changing climate, the rising water demands in fast-growing urban areas are leading to increasing water-use conflicts with the co-dependent rural areas. Although poor water governance is frequently cited as the key reason for such urban–rural conflicts, it is also recognized as a potential pathway to resolve them. In the case of Nagpur Region in Central India, water stress has today become a subject of serious concern. The water demands in Nagpur City are primarily met through the multipurpose Pench Dam on priority, but the recently declining water availability has raised undue concerns for irrigation in the Pench command areas. To substantiate the limited understanding of ongoing water conflicts in the wider Nagpur Metropolitan Area, this study analyzes a specific set of secondary data related to the history of the Pench Project and its water utilization trends. By uncovering the periodic decline in irrigated area and the increasing groundwater use for irrigation, the cross-sectoral and transboundary implications of increasing water transfer to Nagpur City are revealed. To address these concerns, this study then suggests feasible governance strategies based on benefit sharing and multi-stakeholder engagement.