Abstract: Available water volume from the regional sources is ever declining sharply under extreme drought. While the drought-relief water-supply tasks can be assigned to rapidly increase the major reservoirs. However, the conventional reservoir operation cannot fully meet these harsh demands in recent years. It is often required for the high effectiveness of drought-response, in order to buffer the severe water-supply shortages. In this study, a demand-oriented perspective was adopted to distinguish between normal and extreme drought scenarios. A graded drought-limited water level (DLWL) was dynamically controlled to consider the historical supply-demand patterns and abrupt surges in the water demand during extreme events. Three primary steps were set: (1) To define the supply-demand boundaries for the different drought scenarios, according to the water-use patterns and long-term hydrological statistics, (2) To calculate the regular and special DLWLs that represented the minimum storage thresholds for the normal and extreme drought demand, respectively, and (3) to formulate the dynamic control for the switching between the regular and special DLWLs, according to the drought severity, reservoir storage evolution, and the projected surges of the water demand. A case study was conducted for the Wangkuai and Xidayang reservoirs, as well as the Shahe and Tanghe irrigation districts in Hebei Province, China. The regular-special DLWL was calculated to develop a dynamically switchable strategy of the graded DLWL control, in order to guide the drought-response operations. The regular DLWL mode was applied to the normal drought conditions, in order to fully meet the water supply for the urban domestic use, agricultural irrigation, and ecological baseflow. The special DLWL mode was activated under extreme drought. The urban domestic water supply was prioritized to moderately restrict the agricultural irrigation, and then further limit the ecological water use. Three scheduling schemes (baseline scheme, rugular scheme and proposed scheme) were implemented for the comparative analysis. The evaluation was focused mainly on the extremely dry years and typical multi-year dry periods. The results indicate that the regular-special DLWL scheme was applied to substantially mitigate the water shortages in the extremely dry years. Specifically, the total water shortages decreased by 66.53 and 32.45 million m³, respectively, in the Shahe and Tanghe irrigation districts. The earlier strategic storage triggered by the special DLWL markedly improved the water supply guarantee rate during several severely impacted periods in the typical consecutive dry years. There was also an increase from below 10% to approximately 90% and 50%, respectively. The irrigation shortages declined by 186.20 and 182.74 million m³, respectively, over the multi-year droughts. Furthermore, the number of months with the severe shortage decreased by 7 and 32 months, respectively, effectively alleviating the deficits. There was a decrease in the frequency and duration of acute water-stress episodes. Moreover, the approach was more effective in transforming the extreme shortage into a wider and shallower shortage pattern. The incidence of the high-intensity shortage episodes was also reduced to lower the risk of severe shortages. The guarantee rate for agricultural irrigation was improved after optimization. The findings can also provide scientific support for the reservoir drought resistance and emergency decision-making under extreme drought.