Sustainable water use and management has become an important issue globally and in Taiwan during this era of climate change. In search of a paradigm shift, this grounded theory paper investigates the traditional ecological knowledge (TEK) of a Rukai Indigenous community in Taiwan to unearth its core values and core practices related to sustainability, as its people have been living near the headwaters in the mountain area for generations. Six Elders from the community were interviewed, and the findings show that the Rukai TEK of water is guided by taboos, a social mechanism keeping the human-nature balance, which are ingrained in four core values (prevention of water contamination, group sharing, conservation of the sources of life, and adherence to the laws of nature). These core values are reflected in the five core practices of water use, including calakebe (spring), drakerale (streams), drapulu (ivy fishing), wakaruru (water diversion), and wadrele (water monitoring). These core values and practices contribute to the sustainable environment and livelihood of the Rukai community. This study proposes that positioning Indigenous TEK as the subjectivity of sustainability provides important implications for the sustainable management of natural resources, as well as Indigenous education for sustainable development.