This report develops a systematic approach for solving the problem of conjunctive use of surface water and ground water in which both supply water quality and ground water quality are of major concern. The new approach utilizes a two-step nonlinear optimization. A test problem typical of a semiarid river basin with a seasonal agricultural demand and an increasing municipal and industrial demand is presented. Seasonal variations in demand, precipitation and recharge are handled by dividing each modeling year into a wet season and a dry season in the management model. Sustainable pumping and injection rates that would satisfy both the head and water quality constraints are obtained in the management model for each demand-supply scenario. An iterative technique is then used to solve the optimal pumping and injection rates within the planning horizon using the sustainable rates as upper bounds. Nonlinear programming solver MINOS is used to solve the management problem. MODFLOWand MT3D simulate the flow and transport in the ground water basin.