Deficit irrigation (DI) has been emerging as an important technique for enhancing crop water productivity (WP). However, advantage of DI under varying nitrogen (N) application rates remains unclear. Field experiments were conducted during 2012-2014 to investigate the impacts of six irrigation levels[FI (full irrigation), DI10, DI20, DI30, DI40 and DI50, with irrigation amount of 100, 90, 80, 70, 60 and 50% of ETc, respectively) and four N application rates (N0, N10, N20 and N30, with 0, 10, 20 and 30 kg N ha-1, respectively) on WP, yield, quality, and net economic return of peanut in hot arid region of India. We used Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS) method to obtain the optimal combination of irrigation and N rates. Both irrigation level and nitrogen dose had significant effects on yield and quality parameters examined in the study. Relative to FI, DI40 and DI50 significantly reduced yield (40.2-62.1%), economic benefit (70.8-118.5%), WP (8.2-33.0%), and kernel oil content (7.5-11.9%), but DI20 increased WP by 17.1% with only marginal reduction in economic benefit (2.6%), and yield (3.2%). Compared to N0, the N30 had 1.7, 1.1, and 1.6-folds increased yield, oil content in the kernel, and WP, respectively. Among all treatments, DI0N30 had the greatest yield and net return; DI20N30 had greatest WP and oil content in the kernel. TOPSIS analysis showed that DI20N30 was optimal in balancing of WP, yield, net return, and quality of peanut in northwestern arid India. The results have direct implications for improving irrigation water and N management for irrigated crops in arid regions.