AbstractHydrological drought analysis is very important in the design of hydrotechnical projects and water resources management and planning. In this study, a methodology is proposed for the analysis of streamflow droughts using the threshold level approach. The method has been applied to Yermasoyia semiarid basin in Cyprus based on 30‐year daily discharge data. Severity was defined as the accumulated water deficit volume occurring during a drought event, in respect with a target threshold. Fixed and variable thresholds (seasonal, monthly, and daily) were employed to derive the drought characteristics. The threshold levels were determined based on the Q50 percentiles of flow extracted from the corresponding flow duration curves for each threshold. The aim is to investigate the sensitivity of these thresholds in the estimation of maximum drought severities for various return periods and the derivation of severity–duration–frequency curves. The block maxima and the peaks over threshold approaches were used to perform the extreme value analysis. Three pooling procedures (moving average, interevent time criterion, and interevent time and volume criterion) were employed to remove the dependent and minor droughts. The application showed that the interevent time and volume criterion is the most unbiased pooling method. Therefore, it was selected to estimate the drought characteristics. The results of this study indicate that monthly and daily variable thresholds are able to capture abnormal drought events that occur during the whole hydrological year whereas the other two, only the severe ones. They are also more sensitive in the estimation of maximum drought severities and the derivation of the curves because they incorporate better the effect of drought durations.