A facility stage discrete differential dynamic programming approach is presented for determining the optimal operating policy for a multiple purpose multiple reservoir system. The stages in the dynamic programming formulation are defined to represent reservoirs and state variables are defined to represent the amounts of release from reservoirs. Discrete differential dynamic programming, which is an iterative technique, is used to solve the dynamic programming problem to determine the optimal operating policy. The optimal operating policy is the policy which provides the maximum returns for the system. The approach is applied to an example problem which has been solved by gradient projection and conjugate gradient techniques.