Regulators on Friday told San Francisco to stop taking some of the river water it routinely stores in the Hetch Hetchy reservoir.
However, the city is far from having its taps run dry during the drought.
Officials said the cutback orders don't apply to water already stored in the reservoir system, which has enough water to last through two more dry years.
The State Water Resources Control Board ordered the cutback in its latest round of notices informing agencies, corporations and individuals holding water rights that waterways are too dry to meet demand in the drought.
San Francisco depends on snow in the Sierra Nevada melting into the Tuolumne River to supply its drinking water, but the snowpack has largely vanished during the fourth year of the drought.
The city has several century-old claims to the river, including one established when the mayor famously nailed a notice on a tree in 1902. It's not clear how much water San Francisco diverts from the river for storage under the cuts ordered Friday.
"We're very protective of our water rights," said Steven Ritchie, who manages water for San Francisco Public Utilities Commission. "We're going to look very closely at what the state water board does to determine the appropriate course of action."
The Hetch Hetchy reservoir is located 160 miles from the city in the Sierra Nevada and supplies 2.5 million people in the San Francisco Bay Area.
San Francisco gets 85 percent of its water from the reservoir. The densely packed city with few lawns is among the most water frugal in California, with residents using an average of 45 gallons each a day.
Under California's water rights system, the first to stake claims to water as early as Gold Rush days are among the last to face cuts.
The state has already ordered thousands of farmers and others with more recent rights to stop pumping from the Sacramento, San Joaquin and delta watersheds.
The board expanded its cuts earlier this month to more than 100 senior water rights holders in California's agriculture-rich Central Valley.
Some irrigation districts with those prized claims are considering defying the water board and are challenging the cuts in court, saying the agency has no power to regulate their water use.
The latest to sue is the Byron-Bethany Irrigation District, which announced Friday it was seeking to have its curtailment suspended and damages paid. The district supplies water to farmers in three counties and to the 12,000 residents in the community of Mountain House.
"Enough is enough," said Russell Kagehiro, president of the district's board, adding that California farmers feed the state and country. "It is irresponsible and unnecessary. We will fight to ensure that water rights are protected."
The board has the authority to levy $1,000 per-day fines for illegal diversions of water.