Ensuring sustainable management and an adequate supply of freshwater resources is a growing challenge around the world. Even in historically water abundant regions climate change together with population growth and economic development are processes that are expected to contribute to an increase in permanent and seasonal water scarcity in the coming decades. Previous studies have shown how policies to address water scarcity often fail to deliver lasting improvements because they do not account for how these processes influence, and are influenced by, human-water interactions shaping water supply and demand. Despite significant progress in recent years, place-specific understanding of the mechanisms behind human-water feedbacks remain limited, particularly in historically water abundant regions. To this end, we here present a Swedish case study where we, by use of a qualitative system dynamics approach, explore how human-water interactions have contributed to seasonal water scarcity at the local-to-regional scale. Our results suggest that the current approach to address water scarcity by inter-basin water transports contributes to increasing demand by creating a gap between the perceived and actual state of water resources among consumers. This has resulted in escalating water use and put the region in a state of systemic lock-in where demand-regulating policies are mitigated by increases in water use enabled by water transports. We discuss a combination of information and economic policy instruments to combat water scarcity, and we propose the use of quantitative simulation methods to further assess these strategies in future studies. © 2021, The Author(s).