Water is a strategic resource for agricultural development, particularly in the arid and semiarid regions of central and northern Chile. Currently, irrigated surfaces contribute between 60 and 65% of the country’s agricultural GDP. Associated with Chile’s economic growth, total consumptive water use has increased, which, together with population growth, urbanization, water contamination and pollution, has led to important water stress situations that are triggering a greater number of conflicts and social, economic, and environmental vulnerability. The above phenomena will be exacerbated by climate change. At present, surface water deficit covering irrigation demands exists in the central and northern regions. This deficit is projected to increase as a result of climate change, which would increase the challenges for satisfying agricultural water requirements. The objective of this article is to integrally review the key aspects of Chilean water and agricultural water management policies, considering their interphases, providing the reader with a general overview of the main features of this model, an evaluation of its effectiveness and the main challenges agricultural water management faces. Resolving the challenges of the future requires a thorough reconsideration of water management policies and institutions and how water is managed in the agricultural sector in the broader context of overall water resource management in Chile.