Lake areas in urban fringes are under increasing urbanization pressure. Consequently, the conflict between rapid urban development and the maintenance of water bodies in such areas urgently needs to be addressed. An inexact chance-constrained linear programming (ICCLP) model for optimal land-use management of lake areas in urban fringes was developed. The ICCLP model was based on land-use suitability assessment and land evaluation. The maximum net economic benefit (NEB) was selected as the objective of land-use allocation. The total environmental capacity (TEC) of water systems and the public financial investment (PFI) at different probability levels were considered key constraints. Other constraints included in the model were land-use suitability, governmental requirements on the ratios of various land-use types, and technical constraints. A case study implementing the system was performed for the lake area of Hanyang at the urban fringe of Wuhan, central China, based on our previous study on land-use suitability assessment. The Hanyang lake area is under significant urbanization pressure. A 15-year optimal model for land-use allocation is proposed during 2006 to 2020 to better protect the water system and to gain the maximum benefits of development. Sixteen constraints were set for the optimal model. The model results indicated that NEB was between $1.48 x 10(9) and $8.76 x 10(9) or between $3.98 x 10(9) and $16.7 x 10(9), depending on the different urban-expansion patterns and land demands. The changes in total developed area and the land-use structure were analyzed under different probabilities (q ( i )) of TEC. Changes in q ( i ) resulted in different urban expansion patterns and demands on land, which were the direct result of the constraints imposed by TEC and PFI. The ICCLP model might help local authorities better understand and address complex land-use systems and develop optimal land-use management strategies that better balance urban expansion and grassland conservation.