Environment and energy minister Theodoros Skylakakis told a news conference that the project involving new works and upgrades to the existing water network were aimed at improving quality and limiting loss.
Drought is most acutely felt in the southern Aegean and eastern Crete, he said.
According to the national observatory, Greece had the warmest winter and summer on record since reliable data collection began in 1960.
The works, partly funded through EU projects, could be worth nearly 5.8 billion euros ($6.4 billion), state agency ANA reported.
Part of them will be carried out on Greek islands popular with tourists which have recently struggled, particularly during the summer months.
The island works include renewable energy, pump storage and desalination projects, Skylakakis said.
The state-owned water companies of greater Athens and Thessaloniki will also expand to neighbouring areas and absorb small municipal operators to improve water management, the minister said.
There are nearly 250 water operators in Greece and poor accountability leads to over 35 percent of water being lost, he said.
Greater Athens water company (EYDAP) chief executive officer Harry Sachinis on Wednesday said the company's water reserves were down from 1.1 billion cubic metres in 2002 to an estimated level of under 700 million by October, enough to last the capital four years.
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