While the conflicting political interests of countries along riparian borders pose a major obstacle to forming water agreements in transboundary basins, divergent interpretation of water law principles by upstream and downstream states adds a further layer of complexity to the process. The present paper applies the “painted water” concept, a novel approach proposed by Shahbazbegian and Dinar (Water 15(19):3343, 2023), to address part of this obstacle. The concept implies that water at the tributary of a transboundary river can be categorized into three painted volumes (green, yellow, and red) based on the degree of complexity in negotiation between upstream and downstream states. It provides insights into how governments can develop effective negotiation strategies considering the dynamics of painted water transitions over time. The aim of this chapter is to examine how this concept aligns with three customary principles of international water law (IWL) including (1) duty to cooperation; (2) equitable and reasonable utilization; and (3) obligation not to cause significant harm. To this end, the chapter explores the application of the painted water concept in interpreting the IWL. The chapter demonstrates that the concept not only adheres to the principles, but also illustrates their application to transboundary water management.