The river is the primary source of water for Maseru, the capital of Lesotho, which stands on the river. During periods of low rainfall water shortages can ensue. To combat this, reservoirs have been created with structures such as the Muela Dam and the Meulspruit Dam. In 2003 water was released from here to avert drought.
The Caledon valley is important in the history of the Basotho people. The area was exceptionally fertile and could be farmed without irrigation. This made it desirable and was one of the causes of the conflict between the Basotho and the Boers.