In order to study the water supply and demand in Longkou City, a coastal developed city in Shandong province, the System Dynamics (SD) approach is applied to develop a SD model of water supply and demand for the area. Four development scenarios has been designed to simulate the water demands of Longkou from 2009 to 2030. Total water demand, water deficit, industrial GDP, tertiary industrial GDP and COD emission were selected as the indexes to evaluate the water supply and demand situation of Longkou. The results show that the water resources of Longkou can not meet the needs of social economic development in the future. No matter what development scenario is adopted, the water deficit problem of Longkou will not be completely solved in future years. Scenario 3 (sustainable development scenario) can effectively alleviate the water deficit problem in Longkou. Based on these results and analysis, the countermeasures were put forward to maintain the sustainable development of social economy and water resources, namely, full use of science and technology, and comprehensively consider of economic development, “exploit new resources and conserve existing resources” of water resources, adjustment of industrial structure, and water environment control and protection.