Cotton is one of the most important irrigated crops in subtropical Australia. In recent years, cotton production has been severely affected by the worst drought in recorded history, with the 2007–08 growing season recording the lowest average cotton yield in 30 years. The use of a crop simulation model to simulate the long-term temporal distribution of cotton yields under different levels of irrigation and the marginal value for each unit of water applied is important in determining the economic feasibility of current irrigation practices. The objectives of this study were to: (i) evaluate the CROPGRO-Cotton simulation model for studying crop growth under deficit irrigation scenarios across ten locations in New South Wales (NSW) and Queensland (Qld); (ii) evaluate agronomic and economic responses to water inputs across the ten locations; and (iii) determine the economically optimal irrigation level. The CROPGRO-Cotton simulation model was evaluated using 2 years of experimental data collected at Kingsthorpe, Qld The model was further evaluated using data from nine locations between northern NSW and southern Qld. Long-term simulations were based on the prevalent furrow-irrigation practice of refilling the soil profile when the plant-available soil water content is <50%. The model closely estimated lint yield for all locations evaluated. Our results showed that the amounts of water needed to maximise profit and maximise yield are different, which has economic and environmental implications. Irrigation needed to maximise profits varied with both agronomic and economic factors, which can be quite variable with season and location. Therefore, better tools and information that consider the agronomic and economic implications of irrigation decisions need to be developed and made available to growers.