Both China and India are suffering from a set of grave water crises involving water scarcity, imbalance in both space and time, low water use efficiency and rampant water pollution. Sino-Indian relations might suffer due to a ‘concern’ over the so-called ‘diversion of the Yarlung Zangbo’ and water resource development in Tibet. However, the two neighbours need to cultivate sincere water cooperation covering joint research in hydro-technology and water policy, business-to-business engagement and international cooperation on water issues. This will effectively help address the water challenges of both countries. The paper aims to outline the major water security challenges inside both China and India as well as potential conflict over water between them on the one hand, and to explore possible water cooperation between the two neighbours on the other. The major hypothesis is that domestic water security challenges for both China and India are real and severe, while the so-called water conflict between them is largely a played-up story. In this sense, the paper rejects the zero-sum realist framework and calls for a non-zero-sum liberalist approach for a better understanding of the water dynamics between China and India.