Water-use efficiency (WUE) is defined here as the ratio of grain yield (kg/ha) to crop water use by evapotranspiration (mm). Much of the WUE literature has focussed on either the determination of the boundary of attainable WUE for any amount of available water, or on the practicalities of measurement of the WUE of a crop. While these are important issues for defining the gap between the attained and the potential WUE, little progress has been reported on clarifying the components that contribute to this gap or on how it can be bridged. To address these questions, we analysed 334 wheat fields for which we had the data necessary to both calculate WUE and to simulate crop growth and water use. Simulations were conducted through Yield Prophet®, an on-line version of the APSIM systems model. For this dataset, evapotranspiration accounted for 69% of observed yield variation, although the more commonly used growing-season (April–October) rainfall accounted for 50%. Considering that evapotranspiration efficiency does not account for a wide range of potentially yield-limiting factors including soil and fertiliser nitrogen supply, crop phenology, and sowing dates, or rainfall distribution, these results reinforce the importance of evapotranspiration efficiency as a yield determinant for well managed crops in water-limited environments. WUE attained over the whole dataset was 15.2 kg grain/ha.mm (x-intercept = 67 mm), although this value contained data subsets with important differences in WUE based on soil water-holding capacity and regional diversity. Yield Prophet® simulated commercial wheat yields with RMSDs of 0.80 t/ha (r2 = 0.71), with some systematic error between observed and simulated yields. Simulated crops achieved a higher WUE (16.9 kg grain/ha.mm; x-intercept = 72 mm) than the observed crops, probably because APSIM does not account for effects of factors such as weeds, pests and diseases and impacts of severe weather. Simulated ‘what-if’ analysis suggested that further improvement in WUE may be achieved with an early sowing strategy or a higher nitrogen input strategy. A ‘yield maximising’ strategy that included an optimal plant density, early sowing date, and higher nitrogen inputs resulted in an average WUE (21.4 kg grain/ha.mm; x-intercept = 80 mm) that is close to the previously reported (French-Schultz) boundary of WUE. This outcome suggests a great deal of scope for Australian wheat growers to adopt strategies that improve their WUE. Yield Prophet® farmers have already demonstrated significant improvement in on-farm WUE compared with previous studies. However, additional improvements will only be partially realised due to considerations of the cost: benefit ratio and risk in a highly variable climate, and the operational feasibility of these strategies with current technologies.