Officials said the long-debated pact would protect 30 million people who depend on the river for drinking water.
"The adversity of drought has brought the states together and forced us to rethink how we manage this precious resource," said George Caan, executive director of Nevada's Colorado River Commission.
Under rules that date to the 1920s, the four upper Colorado River basin states of Colorado, New Mexico, Utah and Wyoming are obligated to let 8.23 million acre feet of water per year flow to three lower basin states — Arizona, California and Nevada.
An acre-foot is about 326,000 gallons, or about enough to supply two homes for one year, according to water authority estimates.
Under the proposed plan, the upper basin states could release less water downstream during a drought and if a less-than-average snowpack accumulates on the western slopes of the Rocky Mountains.
The lower basin states would adjust through what the plan calls "intentionally created surpluses." For example, the Southern Nevada Water Authority would be able to tap water holdings in the Coyote Spring area of Nevada and exercise its rights to draw water from the Virgin and Muddy rivers. Water for agriculture in Southern California could be "banked" in Lake Mead for future use if farm lands are allowed to go fallow.
The proposal also contains a promise from the authority to help finance construction of a reservoir in Southern California's Imperial Valley, near the Mexico border.
Kay Brothers, the water authority's deputy general manager, said the plan calls for enough water to be released from Lake Powell, the reservoir behind the Glen Canyon Dam along the Arizona-Utah state line, to ensure Lake Mead doesn't drop below 1,025 feet above sea level.
The plan was submitted to the Bureau of Reclamation and will be reviewed by Interior Secretary Dirk Kempthorne.
Pat Mulroy, general manager of the Las Vegas-based Southern Nevada Water Authority, called the proposal "critical" to southern Nevada, which is near its limit of drawing 300,000 acre feet of water per year from the Lake Mead reservoir formed by Hoover Dam.