Abstract: Applying system theory and linear objective programming, a reliable mathematical optimization model for supply and demand balance of water resources for small towns was developed, the contradiction of supply and demand of water resources for Shaliuhe town of Tangshan city was analyzed, and an optimization measure of water utilization was put forward. Results showed that the total water supply was 14.9055 million m³, while the total demands more than 90% of which were used in farming rose to 23.5273 million m³, 24.2973 million m³, 24.9172 million m³, with an excessive exploitation of 8.6218 million m³, 9.3918 million m³, 10.0117 million m³ in 2001, 2005, 2010, respectively if consumption was not restricted. Taking the high rate and low efficiency of agricultural water utilization into account, water saving measures, such as conducting and spreading water saving irrigation techniques, reforesting on farmland, were put forward. By means of year-by-year balance approximation, the amount of water exploitation surplus of the town would be 0.6332 million m³ in 2010, and the supply and demand balance of water resources would be ultimately realized basically at the town.