This study addresses the problem of agricultural water use efficiency via optimization of cropping patterns, irrigation strategies and external trade of agricultural products in Iran. Towards this end, comparative advantages of some principal crops are first determined using Policy Analysis Matrix (PAM) at three levels: farm, plain and basin. Due to importance of irrigation water, a new approach is developed for estimating scarcity price or the social price of irrigation water in the selected regions. Then, optimal cropping patterns at basin and farm levels are determined using mathematical programming techniques and considering water supply risk. According to the findings of this study, optimal allocation of water at the farm level is achieved when marginal return to irrigation water is the same not only in all growing stages of a crop but also at different growing stages of competing crops grown in the farm. Finally, the findings indicated that it is possible to direct optimal cropping patterns at basin level to maximize social profits, water-use efficiency and net virtual water import simultaneously. However, in order to draw a definite conclusion with respect to virtual water trade, more data is needed on the quantity of water embedded in each crop imported from and exported to each country. Moreover, it is necessary to design a suitable agricultural external trade plan to be used as a target for directing cropping patterns. The approach used in this study can be considered a first step in this direction.