Water scarcity invariably poses a threat to the sustainability of cities and rural areas with limited resources, especially in developing countries. This paper presents a new hydro-economic model based on system dynamics and agent-based simulation to enhance the sustainability of urban groundwater. Dynamic pricing was performed based on several parameters, such as resource conditions, price elasticity, consumption history and climate change, to improve the sustainability of groundwater and cover the costs of implementing strategies. Different scenarios based on pricing, rationing, culturalizing, and non-revenue water control strategies were applied in the village of Dehno in Yazd Province as the case study with an arid climate. The results showed that several scenarios can achieve the goal, but, in drought conditions, only a combination of all the strategies will work.