Planning for “water‐sensitive” cities has become a priority for sustainable urban development in Australia. There has been little quantification of the term, however. Furthermore, the water balance of most cities is not well known. Following prolonged drought, there has also been a growing need to make Australian cities more water self‐reliant: to source water from within. This article formalizes a systematic mass‐balance framework to quantify all anthropogenic and natural flows into and out of the urban environment. Quantitative performance indicators are derived, including (1) degree of system centralization; (2) overall balance; potential of (3) rainfall, (4) stormwater, and (5) wastewater to offset current demand; and (6) water cycle rate. Using the method, we evaluate Sydney, Melbourne, South East Queensland and Perth using reported and modeled data. The approach makes visible large flows of water that have previously been unaccounted and ignored. It also highlights significant intercity variation. In 2004–2005, the cities varied 54% to 100% in their supply centralization, 257% to 397% in the ratio of rainfall and water use, 47% to 104% in their potential stormwater recycling potential, and 26% to 86% in wastewater recycling potential. The approach provides a practical, water‐focused application of the urban metabolism framework. It demonstrates how the principles of mass balance can help foster robust water accounting, monitoring, and management. More important, it contributes to the design and quantitative assessment of water‐sensitive cities of the future.