<p>Global climate change and population growth have intensified water shortages in island regions. The tension between water supply, demand, and environmental protection has grown over time. To address this challenge, this study develops a water resource management model for islands based on differential game theory, aiming to achieve a dynamic balance between water supply, water consumption, and environmental impact. The environmental responsibilities of decision-makers are incorporated into the model, which focuses on three key state variables: the scale of island freshwater resources, the water-saving efficiency of manufacturers, and the level of environmental impact. It also explores the interactions between water supply enterprises and manufacturers and analyzes their influence on water resource management. It is indicated by the results that proactive environmental responsibility from both manufacturers and water supply enterprises can significantly improve water-saving performance, reduce consumption, minimize environmental impact, and promote sustainable resource utilization. Furthermore, when water supply enterprises exhibit low environmental responsibility, even islands with abundant freshwater resources may face long-term ecological risks. In cases where conventional water resources are plentiful, water supply enterprises tend to prioritize short-term gains and avoid their responsibilities. Additionally, it is revealed by this research that centralized decision-making is not always advantageous; it can only reduce the environmental impact of water supply processes under specific circumstances.</p> Graphical Abstract <p></p>