Impact of urban development on water system is assessed with carrying capacity. Impacts on both water resource quantity and environmental quality are involved. Multi-objective optimization revealing system trade-off facilitate the regulation. Efficiency, scale and structure of urban development are regulated in two stages. A roadmap approaching more sustainable development is provided for the case city. Environmental impact assessments and subsequent regulation measures of urban development plans are critical to human progress toward sustainability, since these plans set the scale and structure targets of future socioeconomic development. A three-step methodology for assessing and optimizing an urban development plan focusing on its impacts on the water system was developed. The methodology first predicted the pressure on the water system caused by implementation of the plan under distinct scenarios, then compared the pressure with the carrying capacity threshold to verify the system status; finally, a multi-objective optimization method was used to propose regulation solutions. The methodology enabled evaluation of the water system carrying state, taking socioeconomic development uncertainties into account, and multiple sets of improvement measures under different decisionmaker preferences were generated. The methodology was applied in the case of Zhoushan city in South-east China. The assessment results showed that overloading problems occurred in 11 out of the 13 zones in Zhoushan, with the potential pressure varying from 1.1 to 18.3 times the carrying capacity. As a basic regulation measure, an environmental efficiency upgrade could relieve the overloading in 4 zones and reduce 9%‒63% of the pressure. The optimization of industrial development showed that the pressure could be controlled under the carrying capacity threshold if the planned scale was reduced by 24% and the industrial structure was transformed. Various regulation schemes including a more suitable scale and structure with necessary efficiency standards are provided for decisionmakers that can help the case city approach a more sustainable development pattern.