Domestic water use/demand is a complex function of socio-economic characteristics, climatic factors and public water policies and strategies. This study therefore develops a model based on the multivariate econometric approach which considers these parameters to forecast and manage the domestic water use/demand. The model applies statistical tools to select suitable demand function and most relevant explanatory variables that have strong relationship with water use/demand. The model applicability is demonstrated with an example of domestic water use in Kathmandu Valley, Nepal. The results indicate that the number of connections, water pricing, public education level, and average annual rainfall are significant variables of domestic water use/demand. The paper further analyzes the effect of length of data series on accuracy of model results. The developed model is used to forecast the water use/demand in the future in the study area.