Urbanizing river basins in the west are encountering serious water quality degradation resulting from the expanded water utilization. In order to avoid aggravating such conditions, water quality controls need to be implemented. The important questions are, therefore, where and how to impose such constraints on the urban and agricultural sectors to achieve the desired level of pollution control. An application of the model developed to address such questions is made in the Utah Lake drainage area of Central Utah as a test of the model's utility. The region is subdivided into five major sub‐basins containing both municipal and agricultural water demands. A submodel of each sub‐basin is developed which optimizes the water quality control strategies by linking the urban to the agricultural uses and then evaluating the levels of control for each sector. From these results, a cost‐effectiveness function for each sub‐basin is generated. By jointly considering the cost‐effectiveness relationship for each sub‐basin, an optimum policy for the entire basin is determined.