Water trading in Australia is enabled by much historical institutional development, which had other objectives at the time that it was implemented. After 2 decades of institutional reform to enable water markets in the Murray Darling Basin, active markets are reallocating surface water entitlements among irrigation users. However, permanent water trading is currently limited in terms of the volume traded and reallocation among uses. Given these limitations, this paper seeks to assess the success of surface water markets in the Murray-Darling Basin by comparing current practice against the six desirable characteristics for water markets suggested by Howe et al. (1986). Overall, it is argued that, despite the relatively low rate of reallocation, the market performs well against most criteria but that ongoing evolution of institutional arrangements is critical for improved success.