Water is the most critical natural resource in the world and one of the scarce inputs of the agriculture sector in arid and semi-arid areas, including Iran. Consecutive droughts, lower groundwater levels, and lower water quality are among the concerns of farmers and policymakers in Iran. Therefore, the impacts of various factors, including the knowledge-based economy index on the water crisis in Iran were investigated. We applied the Bayesian Network for modeling water crisis management. In doing so, we identified the key factors related to water crisis management using the U.N. indicators. The composite index of the knowledge-based economy was calculated using knowledge assessment methodology. The results of the U.N. indicator indicated that Iran is in a state of severe water crisis. The modeling results showed that advances in the knowledge-based economy index could alleviate the water crisis. Also, we found that increased economic growth could exacerbate the water crisis. Sensitivity analysis showed that drought has the most significant impact on the water crisis. Therefore, planning and policymaking to advance the various components of the knowledge-based economy and moving towards sustainable development can help manage the water crisis. The components of the knowledge-based economy comprised innovation, knowledge and human resources, information and communication infrastructures, and economic incentives and institution