There has been substantial water resources development for agriculture in India but the emphasis has been mainly on the technical side - the building of the necessary institutions required for effective management of the resource has received little attention. Many believe that water resource management in India is heading for a crisis unless the institutions and related policies are rapidly transformed. In this light, the study examines key features of water institutions in India, applying new institutional economics fundamentals, as well as management theories of good governance. The study uses a survey of 29 water institutions and 450 farm households conducted across three states in India which face water scarcity and have attempted to address it through institutional efforts and innovations. The findings indicate and help identify important characteristics of institutional design for creating better institutions. Findings indicate that derived from new institutional economics fundamentals, the stress on features such as clear objectives, good interaction, adaptiveness, appropriateness of scale, and compliance ability are very important for institutional performance. They reduce transaction cost and promote cooperative solutions, which are key contributions of good institutions. Delivery of good governance by effective institutionalization of technical, organizational, and political rationalities are also very important. This requires empowerment of bodies such as the general body, chairman, managing committee and secretary in the institutions. The results bring out some significant associations and ways for enhancing institutional performance in water resource management in India.