Securing reliable water resources in arid and semi-arid regions poses a significant challenge for decision-makers, especially under recent droughts and projected climate change. This need is particularly acute in the M'zi Wadi basin, located in the north-central part of Algeria, where its surface water projects are challenged by low and erratic rainfall coupled with high water evaporation, adversely impacting its water resources sustainability. Implementing water harvesting techniques in such arid regions, specifically groundwater dams, can be regarded as an effective water scarcity adaptation strategy, and their effectiveness is dependent on the optimal site selection which must consider many complex criteria. The paper aims to identify potential sites for groundwater dams in the M'zi Wadi basin using a multi-criteria decision-making approach in a GIS environment based on seven socio-economic and natural factors such as rainfall, stream order, land use/land cover (LULC), geology, Topographic wetness index (TWI), and distances from faults and villages. The results showed that approximately 1.27% of the M'zi Wadi basin area is highly suitable for groundwater dam siting. Four candidate sites were identified as having favourable conditions for installing new groundwater dams based on field and geophysical survey data conducted along the alluvial aquifer of the M'zi Wadi basin, and the remaining areas were deemed unsuitable due to specific constraints. The suitability of the selected sites was validated through a comparative analysis with existing groundwater dams. The results of the present study could offer valuable insights for decision-makers at all levels, facilitating informed judgments during the initial planning of groundwater dam construction. Furthermore, the methodology can be replicated in other data-scarce regions under similar arid climate conditions.