Irrigated cotton (Gossypium hirsutum L.) is produced mainly in Northwest China, where groundwater is heavily used. To alleviate water scarcity and increase regional economic benefits, a four-year (2016–2019) field experiment was conducted in Qira Oasis, Xingjiang Province, to evaluate irrigation water use efficiency (IWUE) in cotton production using the Root Zone Water Quality Model (RZWQM2), that was calibrated and validated using volumetric soil water content (θ), soil temperature (Tsoil°) and plant transpiration (T), along with cotton growth and yield data collected from full and deficit irrigation experimental plots managed with a newly developed Decision Support System for Irrigation Scheduling (DSSIS). In the validation phase, RZWQM2 adequately simulated (S) topsoil θ and Tsoil°, as well as cotton growth (average index of agreement (IOA) > 0.76). Relative root mean squared error (RRMSE) and percent bias (PBIAS) of cotton seed yield were 8% and 2.5%, respectively, during calibration, and 20% and −10.3% during validation. The cotton crop’s (M) T was well S (−18% < PBIAS < 14% and IOA > 0.95) for both full and deficit irrigation fields. The validated RZWQM2 model was subsequently run with seven irrigation scenarios with 850 to 350 mm water (Irr850, Irr750, Irr700, Irr650, Irr550, Irr450, and Irr350) and long-term (1990–2019) weather data to determine the best IWUE. Simulation results showed that the Irr650 treatment generated the greatest cotton seed yield (4.09 Mg ha−1) and net income (US $3165 ha−1), while the Irr550 treatment achieved the greatest IWUE (6.53 kg ha−1 mm−1) and net water production (0.94 $ m−3). These results provided farmers guidelines to adopt deficit irrigation strategies.