Municipal wastewater warrants increased attention as a potential environmental pollution and a possible irrigation water source. A long-run mathematical programming model aimed at regional optimization with regard to plant capacity, treatment level, allocation of the effluent to the participating farms and cropping patterns at each farm is presented. The model is applied to an agricultural region in Israel which includes a town and several farms. The results indicate the necessity of a subsidy for regional cooperation and provide a regional setup of reusing municipal wastewater for irrigation. The optimal solution enables each farm to reallocate the fresh water quota among the different land sections, to cultivate new land areas and to expand the irrigated crops by using effluent. The acceptability of the regional optimal solution by the town and the farms is discussed in another paper.