It shows Californians are starting to understand "that we are in the drought of our lives," state water regulator official Felicia Marcus said.
It is the second month in a row the state has exceeded emergency conservation regulation.
California has been dealing with record low water levels for four years.
California Governor Jerry Brown imposed the state's first mandatory water restrictions four months ago, ordering a 25% reduction in all towns and cities.
In June, the state used 27% less water than it used in the same period of 2013, when the drought emergency was first declared.
This saving rose to 31.3% in July, with a cumulative saving for both months of 29.5%, the State Water Resources Control Board reported on Thursday.
Felicia Marcus, who chairs the board, praised the "millions of conscientious Californians" who she described as "the real heroes here".
She said record rain in July had played a role, as well as better enforcement, including warnings and penalties, and messaging by the water agencies.
But, she warned, "this isn't your mother's drought or your grandmother's drought, this is the drought of the century".
Drought monitors say 92% of California is currently in severe drought or worse, down from 94% at the start of the year.

The drama, which focuses of the lives of the aristocratic Crawley family and their servants, will go into production next year.
This is in addition to the special one-off episode which will air at Christmas.
Created by writer Julian Fellowes, who is set to return for the next series, the show first aired in 2010.
"It is fantastic that Downton continues to be such a phenomenon - still the most popular drama on ITV in its fifth series - and we are thrilled to have commissioned a sixth series," said Steve November, ITV's director of drama commissioning.
"We don't know yet what Julian has planned, but we are looking forward to working with him, the fantastic cast and Carnival again, and have no doubt series six will be unmissable."
Producers have yet to confirm the full cast.
Earlier this week Hugh Bonneville, who plays Lord Grantham, talked to Newsbeat about some of the celebrities, including Kim Kardasian and Kanye West, who are said to be fans of the show.
"It's only a matter of time before they are on the show," joked Bonneville about the pair.
"Hillary Clinton and John Kerry [United States Secretary of State] are fans of the show too.
"To have them like the show as well as trying to run countries and economies is great."
The fifth series of Downton Abbey ends on Sunday 9 November.
Follow @BBCNewsbeat on Twitter and Radio1Newsbeat on YouTube

The pair are expected to be charged with financing terrorism, which carries a maximum penalty of 25 years' jail.
The man was previously arrested during Australia's largest counter-terrorism raids in September 2014.
He is the 14th and final person to be put before the courts as a result of the mass arrests, police said.
NSW Police Deputy Commissioner Catherine Burn reiterated concerns about the girl's age.
"I previously said that it was disturbing that we continue to deal with teenage children in this environment. And today's arrest hasn't altered that position," she told reporters in Sydney.
Cities in California cut water use by 31.3% in July, exceeding a state-wide mandate of 25% to combat a record four-year drought there, officials say.
[NEXT_CONCEPT]
Downton Abbey will be coming back for a sixth series in 2015, ITV has confirmed.
[NEXT_CONCEPT]
A teenage girl and a 20-year-old man are accused of sending money to the so-called Islamic State from Australia.