The water supply and sanitation in Nigeria has come under increasing focus since independence, but particularly during the last 20 years when the country participated in the global efforts and initiatives aimed at addressing the problem of low access to safe water and sanitary means of excreta disposal. In Nigeria, the inadequacy of safe water and sanitation services is manifested in the prevalence of water and sanitation related diseases. For example, diarrhea, which results from poor sanitary/hygiene habits and consumption of water of poor quality, is the second main cause of infant mortality, after malaria, and the third main cause of under-five mortality. There is therefore, no doubt that the drive for poverty reduction in Nigeria recognizes water supply and sanitation as an important component. This is so because water supply and sanitation cuts across and affects several sectors of the economy, including agriculture, rural infrastructure development, education, industrial development and indeed all the sectors of development that require the use of water and the management of sanitation for the benefit and welfare of human beings. Many entities are involved in rural water supply and sanitation. These institutions employ their own implementation strategies and involve individual communities to varying degrees. Because of the inadequacy of the approach adopted by these organization and agencies, expected service delivery has proceeded inconsistently and therefore could not be achieved. Sadly enough, despite the robust initiatives and funding of the sector (both internal and external), the sector has suffered from poor coordination, lack of clear policy direction, lack of focus in terms of goals and objectives which resulted in the nation’s inability to achieve full coverage of the rural population with safe water and improved sanitation services. This paper therefore considers the water supply and sanitation situation in the country and the challenges facing the sector. Furthermore, the paper calls for institutional reforms and review of policy targets, define key elements for the development of action and investment plans as well as provide some guidelines in order to minimize duplication and maximize effectiveness. The paper also suggested strategies and viable framework/agenda for sustainable water supply and sanitation delivery towards achieving the Millennium Development Goals (MDGs).