Over-allocation of irrigation water has led to widespread environmental degradation in the Murray-Darling Basin, prompting discussions of the water efficiency performance of irrigated industries, particularly cotton. There is increasing pressure for irrigators to adopt water efficient practices in line with ecologically sustainable principles, especially with current drought conditions. However, there is great uncertainty surrounding the available measures to improve irrigation efficiency from both ecological and economic standpoints. An integrated biophysical and economic modelling approach is used to determine the optimal allocation of water, irrigation system, source of water, and crop pattern, subject to various environmental and resource targets. Spatially referenced data are used to provide realistic results that are directly applicable to the case study basin in northern New South Wales (NSW). The results can assist in policy design and its implementation to achieve environmental objectives at least cost.