The demand for water in Taiwan has increased significantly in recent years because of industrial growth and increasing living standards. However, environmental concerns have postponed the further development of large water resource projects, so the risk of shortage is increasing. Hence, resolving the tension between ecological crisis and economic growth, while ensuring the sustainable development of water resources is very urgent for government authorities. Accordingly, this investigation proposes a process for evaluating water policy systematically and quantitatively, with reference to water quantity and water quality as they pertain to the planning and management of regional water resources. The process includes the following steps; (1) collecting data and extracting information; (2) establishing and simulating a dynamic system , and (3) selecting policy evaluation indicators. System dynamics is adopted as a framework for the simulation and analysis of water policy, because it is highly appropriate for the analysis of water resources problems that incorporate feedback relationships and have a long-term time horizon. Finally, the establishing of a strategic system-dynamic model is illustrated with reference to water management in the Tachia river basin.