As demand for water continues to grow and developed water resources are almost fully utilized, there is increasing pressure to transfer water from agriculture -- the major water user -- to other water-using sectors, especially cities and factories. Intersectoral transfer of water is likely to become one of the major water policy issues of the 21st century. Transferring water from rural ?agricultural? use to municipal and industrial uses affects not only agricultural but other rural uses as well. Where attention has been given to water rights in such transfers, it is generally rights based on state law that have been considered. This tends to favor those who are politically and economically most powerful. However, water has many uses and users in rural areas besides irrigation alone, and these are often overlooked in water transfer processes. This paper reviews the available evidence on the ways in which different types of water rights have been addressed in intersectoral transfers. This includes studies from the western United States and other western countries, but with an emphasis on experiences in Asia. The impact of transferring water out of agriculture on local livelihoods, whether local people gain or lose, as well as who gains and who loses, depends on the overall economic context, the process by which transfers take place, and the nature and extent of recognition of water rights, and the relative power of the different parties. The paper concludes with implications for further research on this critical trend, with special reference to the Asian context.