This study provides a technique of cost optimization for the proposed water distribution system. A lot of existing water distribution network analysis software lack optimization modules but, ensure other essential conditions are satisfied. Currently, pipe sizes in distribution networks are assigned by trial and error method. Then pressure and velocity values are checked whether they are within permissible values or not. A program is written in MATLAB using linear optimization components to compute the least cost possible. Three loops are selected from the total distribution network based on the size of pipes found in the loops. The pipes in the selected loops have larger pipe sizes than other loops. Therefore, it is found reasonable to optimize these loops to get considerable cost reduction. Objective and constraint functions are written in MATLAB file. The Objective function is the sum of the product of cost of each type of pipe per unit meter length. The Constraints are: the sums of the head loss around a loop need to be equal to zero, and the pressures at nodes in the loop must be greater than 15m, and flow velocity in the pipes need to be greater than 0.6m/sec. Water supply systems should design efficiently and cost effectively to meet its objective. This study model and optimizes the water distribution systems (WDS) case study by using WaterGEMs and MATLAB software to estimate pressure head, velocity and optimized pipe diameters and analyzed the cost of initial investment. Dangila water supply system selected for the case study. A total of 4026m of distribution lines having larger pipe diameters were selected for analysis and optimization. From the model analysis result, the minimum pressure decreased from 49m initial to 41m after optimization and the maximum pressure decreased from 61m and 56m. Similarly, flow velocity the minimum velocity increased from 0.23 m/s initial to 0.63 m/s after optimization and the maximum velocity decreased from 2.16 m/s and 2.05 m/s. After optimized the pipes diameter the project cost was decreased by 24.84 % for 4026m distribution line. Use of optimization technique like MATLAB during water supply system design improves the hydraulic efficiency and decrease the cost of the project. Keywords: Cost effective, MATLAB, Optimization, Water Distribution System