Despite progress in international water management in recent decades, innovative methods for ongoing collaborative decision making are still needed to resolve and avoid disputes over transboundary waters. One such conflict is over the operation of the Yuma Desalting Plant (YDP) in Arizona, which has implications for the Cienega de Santa Clara, a recently formed downstream wetland in Mexico. Although treaties have been negotiated in the past to govern the quantity and quality of Colorado River water entering Mexico from the USA, renewed interest in reclaiming low quality wastewater in the context of a long-run drought has sparked a new conflict over developing this water supply for human use or maintaining the flows for ecosystem protection. The formation of a problem-focused workgroup, unofficially representing a range of interested parties, is reviewed as a creative, complementary solution to address this dispute. Specific strengths and limitations of the approach are discussed within the broader context of managing international waters. While the workgroup shows innovation as a collaborative process for conflict resolution, the lack of an open, transparent process and the exclusion of Mexico threaten the successful resolution of the YDP dispute and potential future conflicts over transboundary waters.