Decision of the CPC Central Committee on Accelerating the Development of Water Conservancy Reform clearly puts forward the most stringent water management system, in which the Red Control Line of water use efficiency is one of the major components. In this paper, institutional construction for water use efficiency are discussed, and suggestion of hierarchical control by Red Line, Yellow Line, and Blue Line are given. The suggestion is made on the basis of  introducing the status quo of domestic water use, comparing water use efficiency in China with that in developed countries, establishing the system of water use efficiency, presenting the  responsibility and the appraisal system of water resource management, and combining total amount control and water use efficiency with pollution receiving capacity control in water functional areas.