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The water planning and management policies of the Rio Grande basin no longer respond to the sustainable needs of water users, environment, and international commitments of this transboundary basin between Mexico and the United States. This paper describes how groundwater banking through an in lieu method is one approach leading to better water management in this basin. In lieu groundwater banking is a conjunctive water allocation policy applicable to water users supplied from surface water and groundwater sources. A basin simulation model of the Rio Grande basin, built in the water evaluation and planning system (WEAP) software, was used to evaluate the groundwater banking policy. Two scenarios are discussed: a baseline scenario without new water allocation policies implemented and a groundwater banking scenario considering the in lieu groundwater banking method implemented in the Meoqui aquifer. Results show that groundwater banking can significantly improve water management in the basin, increasing system storage, improving water supply for users in the basin, and enhancing compliance with the treaty obligations. [ABSTRACT FROM AUTHOR]