The Delaware River is a major freshwater supplier of New York City (NYC). Nearly half of NYC drinking water is supplied by inter-basin transfer of surface water stored in reservoirs within the upper reaches of the Delaware River. In its lower reaches, the Delaware River is a tidal estuary, and upstream freshwater discharge provides a critical control on estuary salinity. During the record 1950–1960’s drought, NYC water withdrawals exacerbated low flows. Estuary salinity reached levels that threatened freshwater intakes and groundwater recharge, resulting in legal action and Supreme Court decrees. We revisit this classic case study in coupled human and natural systems using the Energy Exascale Earth System Model (E3SM). The E3SM water management sub-model is updated to include inter-basin water transfer and reservoir-specific operating rules. Model simulations are developed to investigate competition between NYC water demand and in-stream flow targets needed to maintain estuary salinity within regulatory guidelines under historic and future climate. To our knowledge, this is a first demonstration of an Earth System Model simulation with inter-basin water transfer, which, in this study area, provides water for nearly five million people living outside the Delaware River basin in New York City and New Jersey.