The freshwater scarcity and sustainability of overexploited aquifers have been recognized as a big threat to global water security for human development. Consequently, much research has focused in the past on negative consequences of groundwater abstraction, but somewhat less has been documented about the impacts of adequate management practices to address water shortages. Here, using an integrated analysis of InSAR displacement data, groundwater, and geophysical modeling we show how combined management provisions and inter-basin water transfer project has affected the aquifer system in Taiyuan basin in North China. Following groundwater recovery, the alleviation of land subsidence was found with rates being reduced by up to ~70% in the period 2017–2020 with respect to the period 2007–2010. The increase in pore pressure caused by rising groundwater in Taiyuan city, north of the basin, turned four subsidence centers with rates exceeding 110 mm/yr in the 1980 to uplift centers with rates up to +25 mm/yr between 2017 and 2020. A simple linear elastic model for homogenous subsurface properties can explain InSAR-measured surface displacements well. In the central basin, we found a significant seasonal displacement with annual amplitude up to 43 mm (negative peak in autumn and positive peak in spring) related to the groundwater recharge and discharge due to agricultural pumping irrigation. Using cross-wavelet method, we showed a relatively short time lags (less than one month) between surface deformation and water level changes in the central basin, indicating the low-permeability clayey units have a limited influence in delaying the compaction of aquifer system. Quantifying the effects of adequate groundwater management measures and large-scale engineering approaches like inter-basin water transfer to recharge pumped aquifers provide insight for local governments and decision-makers to properly evaluate the impacts of their policy in recovering the sustainability and efficiency of aquifers in water-deficient basins.