A groundwater dam is generally designed and constructed at sites where an alluvial aquifer is widely formed to store groundwater for the supply of drinking water or agricultural use. A groundwater dam was planned to be constructed at Sandong-Myeon, Namwon-Si, in Korea. Three candidate sites (Site 1, Site 2, and Site 3) were considered for the construction. In this study, numerical modeling was performed to investigate the effects of the following factors on the groundwater storage capacity: (1) location of the dam, (2) thickness of the cutoff wall, (3) properties of construction materials, and (4) depth of the wall. In addition, sensitivity analyses were carried out to investigate the parameters that influence the results of modeling. Based on the results of the sensitivity analysis, the optimum installation location, hydraulic conductivity of the cutoff wall, wall thickness, and depth of the wall were suggested for the groundwater dam. Site 3 was chosen as the optimum location for the dam because it had the largest alluvial zone among the three sites. In addition, it was found that geological conditions such as the location and depth of an alluvial zone were more important factors for effective groundwater dam construction than the thickness or hydraulic conductivity of the cutoff wall.