We consider regulatory policy guidelines for improving the surface water quality. Specically, we establish a practical water pollution regulation system by determining the optimal location of monitor stations along with proper regulation schemes to curb the nutrient pollution resulting from various farming activities. We develop a central planner s monitoring system optimization model along with analysis methodologies. We construct an innovative computational solution methods for optimizing and analyzing the above model for a large-scale water network, and implement the model to Mississippi River Watershed. The proposed modeling framework and solution method are applicable to any general water network, and thus can be further implemented to other water networks in any other region.