The present approach has a two-fold emphasis. On one hand, water supply options are modeled and the optimal combination is presented through the identification of the least cost water supply scheme. On the other hand the results may be used towards the delineation of sustainable environmental policy options, particularly in the vulnerable system of small islands. Hence an optimization model has been developed that minimizes the Net Present Value (NPV) of water supply projected costs for the period 2002-2030 for Paros Island, Greece. The non-linear generalized reduced gradient method is used, taking the capacity of water supply options as the decision variable. The model incorporates the operation of groundwater wells and boreholes, surface storage reservoirs, conventional and wind-powered desalination and water hauling by ships. Finally, it estimates the monthly water production as well as the water supply costs. The identified solution involves the combined use of all water supply options and may provide the optimal contribution of each one of the supply sources, on a monthly time step. The results indicate that conventional water supply topped by versatile desalination schemes used for the particularly demanding water consumption peaks may be the focal area of responses for the island of Paros, and by extension for other areas around the world facing similar problems.