An essential first step in the design of a municipal water distribution system is the determination of the locational placement or layout of the links of pipe that will form the system. A two-level hierarchically integrated system of models is developed for the layout of both single and multiple source water distribution systems. The first level, a nonlinear programming model, selects an economical tree layout for the major pipe links. The second level, an integer programming model, chooses the loop- forming links to add to the first level tree layout in order to minimize the cost of providing a specified level of reliability in case of failure of the larger first level links. The system of models is applied to an example two-source water distribution system layout problem.