The incorporation of renewable power generation into existing water supply systems is known to have far-reaching influences on system operation in response to booming urbanization. This study proposed a holistic system-wide solution driven by water resources perspectives encouraging small-hydropower generation using artificial intelligence techniques to leverage the synergies of the Water-Food-Energy (WFE) Nexus. The Shihmen Reservoir and its water supply system serving the public and agricultural sectors in northern Taiwan constituted the study case. The proposed three-faceted approach was explored systematically through: optimizing multi-sectoral water allocation, maximizing the installation of small-hydropower turbines aligned with the obtained optimal multi-sectoral water allocation, and uplifting the synergistic benefits of the WFE Nexus steered by the optimal water allocation and small-hydropower installation. The findings pointed out that the derived optimal water allocation could greatly alleviate water shortage conditions and improve reservoir water retention while the acquired optimal small-hydropower installation scheme could favor hydropower output without reducing water supply to demanding sectors. Taking the M-5 operational rule curves simulation as the benchmark, the comparative results demonstrated that the multi-year joint optimization under the collaboration of water allocation and small-hydropower installation could offer mutually beneficial outcomes on the WFE Nexus: largely mitigate the average annual water shortage index by up to 40.0% (water sector), boost the average annual food production by as high as 10.6% (food sector), and lift the average annual hydropower output by 7.5% (17 million USD/yr; energy sector), respectively. This study not only opens new perspectives on cleaner energy production benefiting WFE Nexus synergies but suggests policymakers with executable strategies on small-hydropower practice in the light of sustainable development, which carves a niche in small-hydropower practice and contributes to the fulfillment of future energy needs.