This study developed a prototype of an environmental assessment tool, SEA_LUP_SD, based on the system dynamics model. SEA_LUD_SD can simulate and evaluate information feedback of land use plan options and three related systems, population change, economic development, and environment conditions. This tool was then applied to the Shanghai land use master plan (1997–2010) and three other hypothetical planning options to compare the corresponding environmental impacts of different plan scenarios. This study proved that the integration of system dynamics and the framework of strategic environment assessment (SEA) has the great potential to provide urban managers and planners an effective technical platform to compare a series of “what if” scenarios for the entire planning horizon and to formulate policy recommendation on the basis of the simulation results. In addition, SEA_LUD_SD can help promote public participation in environmental decision-making processes and to educate decision- and policy-makers about the significance of sustainable development in tangible operational terms rather than through political rhetoric in the context of the China's post-reform political economy.