The main objective of this study is an assessment of the potential of applying land use optimization methods for minimizing the sediment yield from catchments. The study area is the Siran watershed, a subwatershed of the Tarbela watershed in Pakistan which drains directly into the Tarbela reservoir. It has an area of 4Ub sq. miles and receives 47.82 inches annual average precipitation. The main land use practices on the Siran Watershed are agriculture, rangeland grazing and forestry. A stochastic model for simulating daily precipitation and another for simulating daily maximum temperatures are developed for the area. The synthetic daily precipitation events are transformed into daily streamflows by the soil moisture counting streamflow model using the synthetic daily maximum temperatures as input. The streamtlow model, called the Generalized Streamflow Simulation System, is modified and used for simulating baseflow recessions. The stochastic precipitation model, the stochastic temperature model and the deterministic streamflow models were combined with the deterministic sediment yield model for simulating sediment yield from the watershed. The modified Universal Soil Loss Equation was used for simulating sediment yield. Parameters at these models were determined from data taken on the Siran Watershed. A linear program was used for land use optimization to minimize sediment yield and maximize watershed production. Both optimization processes ended up with the same land use areas allocating the Maximum area for forests. The expected sediment yield was reduced by 2.5 times and production of watershed was doubled. Optimization of crops was accomplished by maximizing the production of agriculture lands. This resulted in the allocation of major agriculture land areas for apple orchards. By adopting the final optimized land use practices, the sediment yield can be reduced to half and watershed production can be increased six times. The results of the present study are encouraging and indicate that application of land use optimization methods for reducing sediment yields nave great potential on the study area and on other subwatersheds of the Tarbela and Manyla Watersheds. The methodology developed in this study can provide a useful tool for watershed managers to reduce sediment yields and increase the income of the local inhabitants by maximizing the agriculture production in other parts of the country.