Embodiments of methods and systems for optimizing operation of a wind farm are presented. The method includes receiving new values corresponding to at least some wake parameters for wind turbines in the wind farm. The method further includes identifying new sets of interacting wind turbines from the wind turbines based on the new values. Additionally, the method includes developing a farm-level predictive wake model for the new sets of interacting wind turbines based on the new values and historical wake models determined using historical values of the wake parameters corresponding to reference sets of interacting wind turbines in the wind farm. Furthermore, the method includes adjusting one or more control settings for at least the new sets of interacting wind turbines based on the farm-level predictive wake model.