Overallocation, increased demands, recognition and quantification of environmental flows, and climate change have combined to make water leasing a practical solution for addressing water shortages in many watersheds. Leasing involves the temporary transfer of the consumptive use portion of a water right to another user presumably for a higher value purpose. Therefore, understanding the effect of water leasing on river flow availability and river ecosystem protection is critical for the watershed-scale water management. Numerical and computational watershed simulation techniques coupled with water right models can allow water managers to allocate water based on the legal framework within the watershed, which in the western United States is typically based on the prior appropriation doctrine. In this study, we simulate the water trades on instream flow using an ASCE Penman-Monteith method of evapotranspiration estimation on water right model. Using the Touchet River basin in Washington State as a study location, we successfully demonstrated simulation of water leases on instream flow. We choose the Touchet River basin as a study location as this basin suffers frequent water curtailment and has existing partnerships across diverse sectors including water leasing markets to address this water resources concern. This information will be extremely valuable for river ecosystem protection and to watershed managers trying to plan future water managements, water storage, and water trading projects.