Water security for those living in poverty is a concern for a broad range of policy makers. Identifying appropriate policy options, however, means coping with complexity and uncertainty inherent in natural and human systems. This paper demonstrates how geographical information systems and simulation modeling can facilitate scenario analysis of water availability and water security. The result is policy development with a strong human context that can empower stakeholders in water resources negotiations and the design of a science-based, community-supported water resources management plans. We applied these tools to two hillside watersheds in Honduras and Colombia to generate basic information about the “state of water resources”, and how they may change over space and time, for the present situation and under alternatives futures. Stakeholder participation in creating and analyzing scenarios is a critical part of the overall policy development methodological framework, so that what might otherwise be only lines on a graph is put into more concrete human terms. The analyses showed that, among others, stream water availability and the location of streams strongly vary throughout the year and over space; that different parts of the watersheds do not equally contribute to stream water; that inequalities exist in household accessibility to streams; and that dams could help supply sufficient irrigation water under alternative development scenarios without endangering water supply to downstream communities. These results are helpful for better understanding landscape processes at a watershed scale, for identifying desired future conditions and negotiating tradeoffs that are required to reach them, and for supporting water policy development.