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In the arid inland basins of China, the long-term unregulated agricultural irrigation from surface water diversion and groundwater abstraction has caused the unsustainability of water resources and the degradation of ecosystems. This requires the integrated management of surface water (SW) and groundwater (GW) at basin scale to achieve scientific decisions which support sustainable water resource allocation in China. This study developed a novel multi-objective simulation-optimization (S-O) modeling framework. The optimization framework integrated a new epsilon multi-objective memetic algorithm (ϵ-MOMA) with a MODFLOW-NWT model to implement real-world decision-making for water resource management while pondering the complicated groundwater-lake-river interaction in an arid inland basin. Then the optimization technique was validated through the SW-GW management in Yanqi Basin (YB), a typical arid region with intensive agricultural irrigation in northwest China. The management model, involving the maximization of total water supply rate, groundwater storage, surface runoff inflow to the terminal lake, and the minimization of water delivery cost, was proposed to explore the trade-offs between socioeconomic and environmental factors. It is shown that the trade-off surface can be achieved in the four-dimensional objective space by optimizing spatial groundwater abstraction in the irrigation districts and surface water diversion in the river. The Pareto-optimal solutions avoid the prevalence of decision bias caused by the low-dimensional optimization formulation. Decision-makers are then able to identify their desired water management schemes with preferred objectives and achieve maximal socioeconomic and ecological benefits simultaneously. Moreover, three representative runoff scenarios in relation to climate change were specified to quantify the effect of decreasing river runoff on the water management in YB. Results show that runoff depletion would have a great negative impact on the management objectives. Therefore, the integrated SW and GW management is of critical importance for the fragile ecosystem in YB under changing climatic conditions.