In this article, the water source diagram (WSD) (Gomes et al., 2007) is extended to the design of water networks involving both fixed flowrate and fixed contaminant load, as well as water loss/gain operations. The algorithm targets minimum external water consumption while simultaneously synthesizing the corresponding water system structure. In addition, it is shown that the WSD can be applied to water allocation problems (WAP) based only on water sources and sinks, maintaining its good performance. To illustrate the methodology, case studies handling hybrid water system are presented, including a zero wastewater discharge discussion and data from a Brazilian pulp mill. (C) 2015 The Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.