This paper presents the application of the Analytic Element Method (AEM) and Particle Swarm Optimization (PSO) based simulation-optimization model for the solution of groundwater management problems. The AEM-PSO model developed was applied to the Dore river basin, France to solve two groundwater hydraulic management problems: (1) maximum pumping from an aquifer, (2) minimum cost to develop the new pumping well system. Discharge as well as location of the pumping wells were taken as the decision variables. The influence of the piping length was examined in the total development cost for new wells. The optimal number of wells was also calculated by applying the model to different sets of wells. The constraints of the problem were identified with the help of water authority, stakeholders and officials. The AEM flow model was developed to facilitate the management model in particular, as in each iteration optimization model calls a simulation model to calculate the values of groundwater heads. The AEM-PSO model was found to be efficient in identifying the optimal location and discharge of the pumping wells. The penalty function approach was found to be valuable in PSO and also acceptable for groundwater hydraulic management problems.