Diffuse nutrient loads are a common problem in developed and agricultural watersheds. While there has been substantial investment in best management practices (BMPs) to reduce diffuse pollution, there remains a need to better prioritize controls at the watershed scale as reflected in recent US-EPA guidance for watershed planning and Total Maximum Daily Load development. We implemented spatial optimization techniques among four diffuse source pathways in a mixed-use watershed in Northern Vermont to maximize total reduction of phosphorus loading to streams while minimizing associated costs. We found that within a capital cost range of 138 to 321 USD ha-1 a phosphorus reduction of 0.29 to 0.38 kg ha−1 year−1, is attainable. Optimization results are substantially more cost-effective than most scenarios identified by stakeholders. The maximum diffuse phosphorus load reduction equates to 1.25 t year−1using the most cost-effective technologies for each diffuse source at a cost of $3,464,260. However, 1.13 t year−1 could be reduced at a much lower cost of $976,417. This is the practical upper limit of achievable diffuse phosphorus reduction, above which additional spending would not result in substantially more phosphorus reduction. Watershed managers could use solutions along the resulting Pareto optimal curve to select optimal combinations of BMPs based on a water quality target or available funds. The results demonstrate the power of using spatial optimization methods to arrive at a cost-effective selection of BMPs and their distribution across a landscape.