Bioenergy related water use intensifies existing water stress, increasing the importance of sustainable management of water resources for sustainable bioenergy production and use. This paper discusses policies and instruments of importance for water use for bioenergy production, considering both biomass production and the subsequent conversion to solid/liquid/gaseous fuels and electricity. Water policies on the biomass production side should focus on ensuring efficient water use. While environmental policy instruments such as command-and-control approaches support maintaining specific water quantities and quality standards for biofuel production, market-based tools can help users to identify least-cost options for biofuel operation. For the energy conversion side, water quality is the key issue that needs to be addressed with adequate policy instruments. Finally, the evaluation of water-use policies and instruments for bioenergy production should not only relate to their direct impacts on water use, but should take into account overall impacts on the economy.