Victorian Premier Steve Bracks says the proposed $10 billion federal takeover of the Murray-Darling basin is back to square one.

Mr Bracks has written to Prime Minister John Howard rejecting the second draft of the legislation.

He says the Federal Government had indicated it would no longer seek total control of the basin, but the new legislation still demands the states refer all their powers to the Commonwealth.

"We're quite shocked to see that after five months of negotiations, we're back to square one, back to a total referral of powers," he said.

"We understood that there would be a limited referral of powers in the final legislation and there's not.

"It appears that this final incarnation of legislation has made this a project that's dead in the water.

"It's dead in the water unless the Prime Minister can recover this and get proper negotiations going for a better outcome."

All other states in the Murray-Darling basin have now agreed to the plan except Victoria.

Federal Environment Minister Malcolm Turnbull called on the Victorian Government to cooperate with the plan.

Mr Turnbull says other states have suggested ways to improve the legislation and Victoria should do the same.

"What we need is some detailed input from him," he said.

"If he's unhappy with particular sections, let him tell us what those concerns are, and then we and the other states can consider them," he said.