ABSTRACTAmid a renewed push to extract water for agriculture and mining, Indigenous advocacy in northern Australia has resulted in the introduction of a new water allocation mechanism: a reserve of water to be retained for the use and benefit of Indigenous communities. Our socio‐legal analysis of the Oolloo Water Allocation Plan shows that the Strategic Aboriginal Water Reserves carry essential hallmarks of neoliberal property relations and are founded in the modernist mode of regulating extracted water as a commodity divisible from land, amenable to partitioning and disarticulated from socio‐cultural relations. Informed by ethnographic material from the Daly River region gathered over almost a century, we describe the hydro‐social relations that are created through customary traditions and practices, water planning and licencing, and the interaction between different scales of water movement and decision‐making by both the state and Traditional Owners. The paper contributes in several ways to research that has identified ontological conflicts as central to disagreements over water and pointed to the difficulty of articulating theoretical framings of ontological difference with the practical work of water negotiations. It shows how the new Indigenous water rights discourse that coincided with the commodification of water in wider Australia shaped the way in which Aboriginal people of this region have more recently articulated their relationships to the Daly River and the limits to state recognition of those relationships. We find that the Reserve model is unable to recognize the capacity of water to connect and unify people and other beings, as well as to define boundaries between them. Within a regime that facilitates resource extraction, a limited opening has been created for Aboriginal people to benefit from this model of economic development, yet we argue that there is reason to fear that the divisions the Aboriginal Water Reserve enacts between waters and land presents significant socio‐cultural risks.