NSW is the big money winner from today's COAG inter-governmental agreement on the Murray Darling Basin, set to receive more than $1.3 billion for major works to help reform water use in the system as part of $3.7B in new Federal funding for the rescue works.

Funding to Victoria is not far behind, at about $1.1b, while Queensland will receive $510m, while $650m will flow to South Australia.

The agreement sets in stone a memorandum of understanding between the States in March, and paves the way for new governance in the Basin, largely driven by Canberra.

The inter-governmental agreement (IGA) includes arrangements for critical human needs, comprehensive and consistent trading arrangements across the Basin and the transition of the Murray-Darling Basin Commission to the new Murray-Darling Basin Authority.

It follows today's meeting of State and Territory leaders and the Prime Minister in Sydney.

“This agreement means there will be urgent action to progress these important projects," Federal Water Minister Senator Penny Wong said.

"We will have a new Basin-wide Plan that puts the national interest first and responds to the threat climate change is posing to the Murray-Darling.

"And for the first time ever, we will have an enforceable, scientifically-informed limit on the amount of water that can be taken out of our rivers and groundwater systems across the Basin."

The Commonwealth has agreed in principle to provide close to $3.7B for significant water projects in South Australia, New South Wales, Victoria, Queensland and the ACT.

Key projects to receive funding under the agreement include $650 million to private irrigators in NSW to support water saving upgrades.

Also in NSW up to $137m will be provided for projects, currently at the conceptual planning stage, that reduce water loss on farms by piping stock and domestic supply systems, made up of $90m for the south of the Basin and $47m for the north of the Basin.

The Commonwealth will provide up to $103m to Victoria for the Sunraysia Modernisation Project, in addition to the agreement to fund up to $1b of the Stage II Food Bowl Modernisation Project in Victoria.

The Commonwealth will also provide $5m for the conduct of a detailed feasibility study to examine the viability of using coal seam gas water as an alternate water resource.

In Queensland the Commonwealth will provide up to $350m for the future purchase of water entitlements from willing sellers in the Queensland section of the Murray-Darling Basin.

In South Australia there is $220m for projects that upgrade irrigation infrastructure and improve river management.

"These projects will help farmers use water more efficiently as we deal with the impacts of climate change," Sen Wong said.