The Marne River is a main tributary catchment for the River Murray, which generates ephemeral flows in wet years. Concerns have been expressed at the construction of large dams in the headwaters of the catchment, about their impacts on streamflow, and consequently recharge to aquifers. The catchment can be divided into two distinct groundwater regions: the Hills Zone and the Plains Zone. The Hills Zone comprises the consolidated basement rocks of the Mount Lofty Ranges, which form fractured rock aquifers. Borehole yields are generally low, and salinities vary. The 1999 land use survey found groundwater pumping for limited irrigation of vineyards to total about 1000 ML/y. A catchment water balance calculated that extractions are currently well below the estimated recharge, and no sustainability issues are apparent. The Plains Zone is underlaid by unconsolidated sediments of the Murray Basin. The main aquifer is the Murray Group Limestone, which is developed for the irrigation of lucerne, olives and turf, and is recharged mainly by infiltration of streamflow. Groundwater level trends have shown a close correlation with streamflow, and hence rainfall, in the Mount Lofty Ranges. After three years of virtually no recharge from streamflow, groundwater levels dropped by up to 3 m (or 10% of the aquifer thickness), to the lowest levels recorded since monitoring began in 1980. A well-calibrated groundwater computer model was constructed and has been used to quantify components of the water budget and predict the impacts of various streamflow scenarios and pumping regimes on groundwater levels. A surprise finding was the significant amount of groundwater used by large red gums growing along the river valley. The prediction results show that continued use at current extraction levels over the next 20 years with the same streamflow conditions will have no impact. Authorised use over the same 20 year period will only add an extra 2.5 m of drawdown in the unconfined Kongolia area. Drawdowns increased by 5-8 m for authorised use in the confined area near the hills, which will have an impact on other users. There was very little difference to drawdowns if unauthorised extractions were included in these scenarios. If streamflow or recharge does not occur over the next 20 years with continual extractions, the aquifer in the Kongolia area would be unusable after only 10 years due to low groundwater levels. In order to raise these low levels, so caused by lack of recharge or streamflow, to the long term average, about three average years worth of streamflow and a flood event would be required. The modelled long term average inflows to the aquifer of about 5000 ML/y compare favourably with the authorised extractions of about 2800 ML/y. However, before analysts use the figures as a basis for determining a permissible annual volume for extraction, the water requirements for groundwater dependent ecosystems (GDEs) should be determined. These GDEs include the red gum vegetation and wetlands downstream of Black Hill which are dependent on regional groundwater levels and local recharge from rainfall.