This study develops a nudging data assimilation algorithm for estimating unknown pumping from private wells in an aquifer system using measured data of hydraulic head. The proposed algorithm treats the unknown pumping as an additional sink term in the governing equation of groundwater flow and provides a consistent physical interpretation for pumping rate identification. The algorithm identifies the unknown pumping and, at the same time, reduces the forecast error in hydraulic heads. We apply the proposed algorithm to the Las Posas Groundwater Basin in southern California. We consider the following three pumping scenarios: constant pumping rates, spatially varying pumping rates, and temporally varying pumping rates. We also study the impact of head measurement errors on the proposed algorithm. In the case study we seek to estimate the six unknown pumping rates from private wells using head measurements from four observation wells. The results show an excellent rate of convergence for pumping estimation. The case study demonstrates the applicability, accuracy, and efficiency of the proposed data assimilation algorithm for the identification of unknown pumping in an aquifer system.