The potential benefits of basinwide groundwater management in agricultural areas are analyzed with an optimization model. The model incorporates functions to compute spatial and temporal groundwater responses to hydraulic stresses, net agricultural revenues as a function of water use, and groundwater recharge from individual stream reaches. Stream recharge is computed on the basis of both groundwater elevations and the amount of streamflow. The model can be run either to maximize basinwide net revenue over a planning period or to simulate private optimization by individual agricultural sectors. The effects of several hydrologic factors on the benefits of basinwide groundwater management are estimated by comparing model results for conditions in the Salinas Valley in California prior to reservoir construction with a number of other hydrologic scenarios. Results indicate that basinwide groundwater management and reservoir operation may be close substitutes for each other under certain conditions, that an interesting relationship appears to exist between the potential benefits of groundwater management and the annual amount of streamflow available for recharge, and that consideration of stochastic variations in streamflow is unnecessary in the analysis of systems relying primarily on groundwater. A framework is also presented for identifying strategies that meet environmental constraints while minimizing the revenue losses to current water users. For all scenarios considered, basinwide groundwater management generates larger revenues than private optimization while using considerably less water.