In services, the customer satisfaction and quality of services hold the central place. Although the term ‘quality’ is widely used, but does not represent a clear scientific concept. In public utilities, the quality is conceptualized in terms of gap between the perception and the expectation of the customers and the service provider. Drinking water utilities are one of the most important services, where quality of services has not been paid due attention. Keeping this in mind, the present study attempts to assess the urban water utility service quality in the two towns of Tanzania, namely Songea and Mbeya. The study suggests a methodology to evaluate the customers satisfaction in terms of Customers Satisfaction Index (CSI). A popular SERVQUAL model used in services marketing is applied to these water utilities so as to assess the importance of perceptibility, reliability, responsibility, safety and empathy for the two water utilities. Thereafter, the service quality which is a gap between the perception and expectation is assessed in terms of these parameters and the associated attributes. It has been noticed that the CSI for Songea and Mbeya is of the order of 56.4 and 58.4%, respectively. From the Tanzanian perspective, it can be considered as ‘satisfactory,’ but can be improved by adopting various structural and non-structural measures such as creation of storages, customers awareness, resources management and participation in decision making.