The Iberian Peninsula precipitation and river flow regimes are characterized by large values of inter-annual variability, with large disparities between wet and dry years, especially in southern Iberia. This situation is a major problem for water resources management in general, and for the production of hydroelectricity in particular. Hydroelectric production represents, in an average year of precipitation, 20% of the total Spanish electricity production (and 35% for Portuguese production). Its absolute value, however, can vary by a factor of three between wet and dry years. We have assessed the impact of the North Atlantic oscillation (NAO) on winter precipitation and river flow regimes for the three main international Iberian river basins, namely the Douro (north), the Tejo (centre) and the Guadiana (south). Results show that the large inter-annual variability in the flows of these three rivers is largely modulated by the NAO phenomenon. Throughout most of the 20th century, the January-to-March river flow is better correlated with the December to February (DJF) NAO index than is the simultaneous (DJF) river flow. Correlation values for the period 1973-98 are highly significant (-0.76 for Douro, -0.77 for Tejo and -0.79 for Guadiana), being consistently of higher magnitude than those obtained over previous decades. This impact of the NAO on winter river flow was quantified in terms of total Spanish potential hydroelectricity production. The important control exerted by the NAO and the recent positive trend in the NAO index contribute to a significant decrease in the available flow. This reduction represents an important hazard for the two Iberian economies because of its negative impact on water-dependent resources, such as intensive agriculture and hydroelectric power production.