In arid and semiarid areas in the world, including the Mediterranean region, groundwater has been widely and intensively used for irrigation over the last few decades. Practical as well as economic reasons make its use much more preferable, as compared to surface water, especially to individual farmers. Yet, this rapid and largely uncontrolled expansion in groundwater exploitation, which stimulated the socioeconomic development of numerous rural communities, has produced many negative impacts on aquifer degradation and environmental deterioration. The most common remedy to such problems is the application of specific groundwater management policies that can simultaneously meet socioeconomic and environmental protection goals. In this sense, the paper introduces a methodology for an optimal management of irrigation water, by specifically exploring the socioeconomic and environmental impacts of spatially allocated water conservation measures at the watershed level. The analysis is conducted by developing a multi-criteria decision-making framework, consisting of three distinct models: a hydrogeological, an optimization, and a multi-criteria one, which appraises the results of the other two. The proposed methodology is presented through a case study at a rural Greek watershed, in which groundwater is the sole water source for an intensively practiced agriculture. A system of water use quotas is the resource conservation policy instrument that is examined under a decision-making approach. Results show that some specifically designed and spatially non-uniform quota allocation schemes can meet in an optimum way the relevant criteria.