In Israel, about 55% of drinking water is derived from desalination (DSW) which removes all iodine. A recent study from Israel demonstrated high rates of iodine deficiency among school-aged children and pregnant women. There are concerns that low iodine may lead to impaired thyroid function. However, to date, the impact of consuming DSW on body iodine status has not been studied. The objective was to assess whether the increased use of DSW is associated with increased rates of hypothyroidism. Using data from a large health fund in Israel, we compared proportions of patients with higher than normal thyroid stimulating hormone (TSH), and lower than normal T3 and T4 levels before and after a massive desalination project became operational in August 2013 in areas with high vs. low use of DSW. Over 400,000 cases were compared in 2010–2013 vs. 2014–2016. Overall, there was no increase in the proportion of individuals with higher than normal TSH levels, or lower than normal T3 and T4 levels. In conclusion, in this population-based study, following the introduction of DSW, there was no evidence of increased incidence of low thyroid function tests, and the trends were similar in both areas highly consuming, or not consuming, DSW.