Extensive groundwater extraction has helped Pakistan to achieve food security, economic development and reduction in rural poverty. However, the problems of groundwater over-exploitation are now threatening the continuation of Pakistan’s groundwater irrigation economy. This paper reviews the groundwater development, examines the benefits it has generated, institutional approaches applied and discusses why the resource has proven so difficult to manage. This study reveals that management of groundwater in Pakistan requires multifaceted actions focusing both on supply-side and demand-side solutions. These include stabilizing aquifer; re-visiting conjunctive water use; increasing productivity of groundwater use, and improving governance considering local socio-cultural factors.