Dacono's sole source of water supply is Colorado Big Thompson (C-BT) water. The C-BT Project diverts water from the Colorado River Basin to the South Platte Basing through a system of 12 reservoirs with a total storage capacity of nearly 1 million acre-feet, 35 miles of tunnels, 95 miles of canals, 3 pumping plants, and 6 hydroelectric power plants with an installed capacity of 216 megawatts.
The city's water is treated by Central Weld County Water District (CWCWD). Dacono and CWCWD entered into an agreement in 1987 for CWCWD to be the water provider to the city. CWCWD treats and delivers water to master meters locations at various points surrounding the city. After the master meters, the city is responsible for operating and maintaining its distribution system to its customers.