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An ecological-economic model is presented for linking the production function approach to existing food web models, such as ECOPATH, in order to identify optimal management strategies for watersheds. The model is applied to the Tonameca watershed, located on the coast of Oaxaca in Mexico. The model is an ecological diagnosis linked to agriculture, fisheries and ecotourism and production functions and profits. Social optimization and externalities are also analysed. The ecological results show that the Tonameca river and lagoon are not extremely polluted and only one scenario of nitrogen run-off estimation indicates high levels of nutrient loading. The mangrove food web analysis results show that the ecosystem is healthy and can support large amounts of nitrogen in water. The agriculture production function and profits depend mainly on water extraction and fertilizer use. Fisheries production function and profits depend on fish biomass and nitrogen concentration in water, which in turn is a measure of fertilizer used in agriculture. Ecotourism production and profits are a function of labour and crocodile biomass related to fish biomass and nitrogen concentration in water. The increase of fertilizer use influences positively in a short term the economic activities but not in a long term. The optimum levels of each activity are evaluated as well as the optimum point of nitrogen run-off for avoiding a negative externality from agriculture to fisheries and ecotourism. Finally, management recommendations for the Tonameca watershed are proposed based on the Mexican framework for coastal and watershed management.