This study analyzes the impact of Taiz City’s mountainous topography on the hydraulic efficiency and spatial equity of its drinking water distribution system. Taiz, situated between 1,150 and 1,700 meters above sea level, features highly variable terrain that strongly influences network performance. The study aims to assess the impact of elevation and slope on water coverage, losses, and infrastructure efficiency by integrating Geographic Information Systems (GIS), the Global Positioning System (GPS), and EPANET hydraulic modeling. Results reveal that service coverage declined from 70.8% in 2004 to 51.6% in 2014, with central districts maintaining higher levels (=60–65%) compared to less than 40% in the elevated eastern and southern zones. The 843.9 km network, shaped by steep slopes, experiences head losses of 30–40 m and pressure surges up to 16 bars, causing frequent pipe failures and non-revenue water losses of 22% of total production—equivalent to an annual deficit of about 28 million m³. Per capita water availability averages 33.2 L/day, which is far below the global benchmark of 80 L/day. Meanwhile, production costs have risen from 218 to 247 YER/m³ due to the energy-intensive nature of pumping. The study recommends constructing two elevated reservoirs (=approximately 80,000 m³ each), expanding storage by 60,000 m³ in high-altitude areas, and replacing undersized pipes (diameter < 150 mm) with 250 mm mains. Integrating GIS-based topographic analysis with EPANET modeling provides a robust framework for sustainable, energy-efficient, and equitable water distribution in mountainous urban environments such as Taiz City.