Melbourne Water has adopted a challenging target of recycling 20 per cent of treated effluent from Melbourne's two major sewerage treatment plants by 2010. This target was adopted in response to key drivers for water recycling in the Melbourne region such as: strong support for conserving water resources and protecting marine environments; acknowledgment of recycled water as a valuable resource; greater emphasis on environmental issues and sustainable management principles; and opportunities to increase demand for recycled water through effective planning mechanisms. Issues that must be effectively addressed to meet the target include: managing public perceptions of recycled water; health and environmental concerns; lack of consensus among government agencies; high up-front costs of infrastructure; and prices of other sources of water supply not currently true costed. Melbourne Water has identified the following factors as critical in determining the success of recycling strategy: ability to demonstrate that water recycling will be important in terms of long term water cycle management; effective stakeholder consultation; gaining government support; establishing long-term, guaranteed markets for recycled water; implementing well planned, large scale recycling schemes; ability to provide a product that meets customer needs; regulatory approval; and implementation of a system that is economically viable. Water recycling initiatives are being investigated on household, local and regional levels. Over 10 proposals that will contribute to the 20 per cent recycled water target from the regional treatment plants are under various stages of development. Melbourne Water's commitment to recycling within a total water cycle management context is a vital component of this major new initiative for Melbourne and is crucial for a sustainable future.