Egypt is an arid country with scarce and limited renewable water resources. Water availability is one of the main problems facing the water resources planning, development and management. A reliable source of surface water is limited and groundwater, which is a vital resource, is used to meet the water demand for agricultural purposes. Due to the limitation of the available areas for agriculture, a government policy started to reclaim the highly elevated desert fringes in many locations in Upper Egypt such as Wadi Al Assiuti, West El Fashn Project, West Samalut Project, West Tahta Project, East Luxor reclamation area, and West Esna Project. However, different operation and traditional management practices for meeting water requirements in these areas using unlined surface water canals and traditional flooding irrigation system lead to water logging in the low lying lands causing soil salinization and water logging problems. Previous studies recommended optimal integration of groundwater with surface water in a conjunctive use system to mitigate this problem. However, there was no detailed analysis and optimization approach to analyze the economic and reliability benefits from different conjunctive use alternatives. In the present study economic assessment of potential and feasible conjunctive use alternatives and planning were explored for Wadi Al Assiuti Area. Quasi 3-D numerical model was developed using TRIWACO Package and GIS based comprehensive database to simulate the steady and transient flow in saturated and unsaturated zones. The calibrated model was used to assess the appropriate scenarios for applying the conjunctive use and assessing these scenarios. An economic-engineering network flow optimization approach was used to analyze the economic and the reliability benefits Sustainable Development via Optimal Integration of Surface and Groundwater… 20 from different conjunctive use alternatives. It was found that integrated management under flexible water allocation can generate sustainable development through minimizing the problem of water salinization and the cost of water pumping and consequently economic benefits to the Wadi. The GIS based model was proved to be an efficient tool for formulating integrated and sustainable management plan. The Quaternary alluvial aquifer system considered as a promising aquifer. About 48,000 m 3 /day can be abstracted from two well fields to supply the required water for future development.Monitoring system is required to assess the deep aquifers within the study area.