Colonial waterbirds breed in relatively few parts of Australia and the Macquarie Marshes are one of the more important wetlands for these species on the continent in terms of size of breeding colonies and frequency of breeding. Breeding data were collected for ten species of colonial waterbirds in the period 1986–2001: Little Black Cormorant Phalacrocorax sulcirostris, Little Pied Cormorant P. melanoleucos, Great Egret Ardea alba, Intermediate Egret A. intermedia, Little Egret A. garzetta, Cattle Egret A. ibis, Rufous Night Heron Nyctiorax caledonicus, Glossy Ibis Plegadis falcinellus, Straw-necked Ibis Threskiornis spinicollis and Australian White Ibis T. molucca. Breeding of most colonial waterbirds in the Macquarie Marshes was positively related to flow in the three months before breeding and triggered when flows were usually above 200 000 Ml. Flow was also positively related to wetland area. These relationships allowed modelling of three different options for management of environmental flow, nominally an annual allocation of 125 000 Ml. Even though the Macquarie River is highly regulated, there were predicted to be major differences in breeding frequency, flow variability and wetland flooding for different options delivering environmental flows. Use of all environmental flows each year provided the least variable option while accumulating the flow in the major dam and delivering it at high thresholds provided considerably more variability for the Macquarie Marshes, increased breeding of colonial waterbirds and increased frequency of large floods. The size of a waterbird breeding event and flooding extent were still primarily affected by river flooding and diversions upstream, despite the amount of environmental flow and the predicted ecological differences among the environmental flow options. Copyright © 2005 John Wiley & Sons, Ltd.