Water Valley is a city in Yalobusha County, Mississippi, United States. The population was 3,392 at the 2010 census. It is the larger of two count…Water Valley is a city in Yalobusha County, Mississippi, United States. The population was 3,392 at the 2010 census. It is the larger of two county seats in the rural county, and at one time was the center of railroad shops.