Governments have agreed to put a new inspector-general in charge of tackling water theft and other integrity issues.

Basin state and territory governments have unanimously agreed to back the federal government's proposal for a new body to hold the Murray-Darling Basin Authority (MDBA) to account.

Water Minister David Littleproud says the new role is in direct response to widely documented compliance issues, including allegations of water theft.

“This is about making sure there's an overarching body that can give confidence between the states,” he told Sky News on Monday.

The inspector-general will have powers to investigate water theft and ensure that efficiency and recovery projects are delivered.

It will refer compliance issues to state and federal anti-corruption bodies, to decide on potential jail time or fines.

“You've got to have a tough cop on the beat that's fair and gets the job done,” Mr Littleproud said.

Northern Basin Commissioner and former federal police commissioner Mick Keelty has been announced as interim inspector-general until federal parliament passes legislation to create the role.

The basin covers around a seventh of Australia and is responsible for 40 per cent of agricultural production.

The agreement came shortly after New South Wales threatened to walk away from the Murray-Darling agreement, arguing South Australia was not doing its part.