Research based development of best management options for aerobic rice–maize cropping systems must be developed to improve water and nitrogen use efficiency. The main objective of this study was to identify water saving rice production technology for rice grown in sandy loam soils in semi-arid conditions using the calibrated CERES-Rice and Maize models of the Decision Support System for Agro Technology Transfer (DSSAT). A two-year experiment with two different crop establishment methods viz., aerobic rice and flooded rice with four nitrogen rates followed by maize under zero tilled conditions was used to calibrate and evaluate DSSAT CERES-Rice and CERES-Maize models. The calibrated models were used to develop best management options for an aerobic rice–maize sequence which can produce similar yields with water savings relative to that of traditional flooded rice–maize system. The results showed that application of 180 kg N ha−1 in four splits and automatic irrigation with 40 mm, when soil available water (ASW) in top 30 cm fell below to 60% was the best management combination for aerobic rice, saving 41% of water while producing 96% of the yield attainable under flooded conditions. Similarly for maize, application of 120 kg N ha−1 and irrigation with 30 mm of water at 40% ASW in the top 30 cm soil was the most dominant management option. Further, application of 180 kg N ha−1 with rice followed by 120 kg N ha−1 in maize provided stable yield for both aerobic and flooded rice systems over time as simulated by the model. The results illustrate that DSSAT model is a useful tool for evaluating alternative management options aimed at maintaining yields and saving water in rice–maize systems in semi-arid regions.