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Timely and cost-effective pipeline replacement is essential to ensure the reliability of a water distribution network. Previous studies for reliability analysis or pipeline replacement planning generally have regarded each pipe as an independent unit. However, impact analyses that look only at independent pipes fail to consider the far-reaching effects on water shortages that can result from a single break. The result can be unforeseen water shortages in other parts of the network and an underestimation of the scope of maintenance or replacement work. This research introduces a segment-based optimization model for pipeline replacement. Compared with the conventional pipe-based model, the proposed model yields significant improvement to water supply reliability. The segment-based model identifies critical segments that, if damaged or shut down, potentially would have the most deleterious consequences for water distribution. Using this model, utilities can make appropriate pipe maintenance and replacement decisions that help mitigate the effects of service interruptions and the resulting consequences for water shortages. Includes 20 references, table, figures.