The 2003 Common Agricultural Policy Reform aimed to promote the socio-economic and environmental sustainability of agricultural systems. An important question is how far the Reform has indeed encouraged farmers to contribute to achieving broad economic and environmental goals. The economic and water resource effects of the Reform have been explored for the case study area of the Lunan catchment, which is typical of Scottish arable cropping areas. Land use data analysis, bio-physical modelling and bio-economic modelling were used in combination to identify the effects of a range of scenarios. The results indicate only small changes in the cropping pattern and associated economic and water quality indicators as a result of the Reform, with the main changes in farmers' decision making being explained by crop price changes.