Due to water scarcity problems, the reclamation of wastewater is an increasingly important water source in many parts of the world. The use of reclaimed wastewater is often advocated, as a cheap and reliable form of water supply, which preserves water resources and is an economically efficient method for processing sewage. This study integrates wastewater recycling in a Computable General Equilibrium model. The novelty of the approach is that the quantity of reclaimed wastewater depends on water consumption by economic agents connected to a sewer system, such that a cascading water use can be modeled. An application to the case of Israel shows that not considering this linkage can lead to an overestimation of the potential of wastewater recycling, especially when economic agents engage in water saving.