The Mount Gambier area of south-eastern South Australia is totally dependent upon groundwater for its water supplies. Water of low salinity is extracted from an unconfined aquifer (the Gambier Limestone) and, to a much lesser extent, confined aquifers (the Knight Group sands). Both systems are likely to contribute to the Blue Lake, which occupies a recent volcanic crater, and from which the city of Mount Gambier derives its municipal supplies. A winter precipitation surplus of 300 mm over the potential evapotranspiration allows recharge to the unconfined aquifer through most of the area. The amount varies considerably with soil type and land use, with extremes shown by pine forests ( little or no recharge) and karstic pavements (recharge estimated at 100-200 mm). Water balance determinations suggest that current recharge estimates need to be increased by 25% or more to balance an estimated discharge of 6.6 cumecs from the system. The confined aquifer derives much of its recharge to the north of the area studied, but some is expected north of Mount Gambier, where leakage downwards through the confining beds is likely to occur. Withdrawals have not reached a serious level in either aquifer. Most of the discharge from the unconfined system is controlled by the solution-enlarged fracture system which localizes major spring discharges at the coast, and has a hydraulic conductivity of 100-300 m3day_1nrS compared with 10-30 m3day-lm-2 for porous medium flow in unfractured aquifer material.The hydrochemistry of the unconfined aquifers can be explained in terms of cyclic salt and dissolution of impure limestone. The cavernous nature of the limestone underlying most of the area has facilitated subsurface waste disposal. In turn a serious pollution problem has developed, particularly in the Mount Gambier city area. The main indicator of pollution is the nitrate ion, derived from the breakdown of organic wastes. Nitrate concentrations range from immeasurably low to 490 mg/1, considerably in excess of the safe limit for infants, and dramatic when compared with natural concentrations of 0-25 mg/1. Localized contamination is a problem in rural areas, with dairies, houses and stockyards alll contributing, particularly where they coincide with karst features such as solution enlarged fractures. Although pollution of the unconfined aquifer is serious at Mount Gambier, there remains a valuable resource elsewhere in the area. The confined system is also unpolluted, and its development will require careful management to ensure that i ts present hydraulic relationship with the unconfined aquifers is preserved.