Central and Eastern European (CEE) countries are going through unique political, economic, institutional, and social changes associated with the heritage of serious pollution problems from the past. The purpose of this paper is to analyze the water quality management strategies CEE countries may take including the rationale of introducing Western policies in the short run. The policy to be selected must be viable under the existing pressing financial conditions and should feasibly be expanded towards a long-term sustainable scenario as economy improves. As a basis the present economic, social, and institutional setting is outlined, and the state of water quality and the role of emissions of various origins are summarized. A special focus is devoted to municipalities with low and unbalanced levels of infrastructure; the development of these infrastructures could be aburden even for stable economies. An overview and evaluation are given for the water supply, sewerage, and wastewater treatment for urban areas with populations greater than 25,000 in five countries of the CEE region together with a discussion of legislation issues. Major elements of cost-effective development strategies are discussed and illustrated by examples. They incorporate improved demand management and the closing of material cycles, the upgrading of wastewater treatment facilities to match the level of sewerage, the application of regionally variable effluent (and/or ambient) water quality standards and their gradual tightening based on a river basin approach, the innovative selection of combined chemical-biological technologies (for both upgrading and new design) depending on local conditions and the multi-stage development of wastewater treatment plants. The policy suggested for the next couple of decades is characterized by a number of non-uniformities which raises considerable implementation challenges.