The hydraulic performance and future water demand of water distribution networks are major factors affecting the efficiency of water distribution systems throughout the world. Currently, Addis Kidam Town in Ethiopia is facing many water supply challenges. Their existing water distribution system is inadequate experiencing significant water loss, pressure, and flow velocity. All becoming worse with forecast population increases. The main objective of this study was to evaluate the hydraulic performance of the water distribution network considering both the existing water demand, together with forecast future water demand. The study was undertaken in Addis Kidam Town in Ethiopia using static analysis and WaterGEMS V8i software. The data were collected using experiment tests, field observation, focus group discussions, and interviews. Sampling sizes of pipes and junctions of distribution networks were used to evaluate velocity and pressure changes of 12% and 15%, respectively, from high and low-pressure zones. The results of this study indicated that the existing distribution network was designed to supply a population of 8,906; however, the current population was 25,854. The existing system can accordingly not meet current demand. The current system was only supplying 19.5 l/c/d to each family and was only able to supply 45.2% of households. All compounded because water loss of the distribution network was 37.9%. Simulation of existing distribution network at junctions and pipes has both 26.6% and 4.3%, and 2.4% and 29.9% lower pressures and velocities during peak and minimum hourly demand, respectively. Model performance values of RMSE, MAE, R2, and NSE of distribution networks were 0.65, 0.40, 0.96, and 0.82 and 0.56, 0.38, 0.98, and 0.78 during the calibration and validation of pressure, flow, and tank level, respectively. The research recommends a two-phase strategic water distribution system response beginning by upgrading and expanding the water distribution network, to first achieve a supply of 30 l/c/d by 2032, and then lifting this to the 30–80 l/c/d range before 2042. The proposed water management upgrading approach is expected to establish a good water supply for all residential communities of the town facing comparable challenges. In general, this study’s findings showed that the existing water supply system could not meet the present demand, let alone meet future growth demand. The existing modeling highlighted that significant increases in supply are possible by targeting system improvements, together with the need to find additional supply to meet both present and future water demand.