In the lane-based signal optimization model, permitted turn directions in the form of lane markings that guide road users to turn at an intersection are optimized with traffic signal settings. The spatial queue requirements of approach lanes should be considered to avoid the overdesigning of the cycle, effective red, and effective green durations. The point-queue system employed in the conventional modeling approach is unrealistic in many practical situations. Overflow conditions cannot be modeled accurately, while vehicle queues are accumulated that block back upstream intersections. In a previous study, a method was developed to manually refine the traffic signal settings by using the results of lane-based optimization. However, the method was inefficient. In the present study, new design constraint sets are proposed to control the effective red and effective green durations, such that traffic enters the road lanes without overflow. The reduced cycle times discharge the accumulated vehicles more frequently. Moreover, queue spillback and residual queues can be avoided. One of the most complicated four-arm intersections in Hong Kong is considered as a case study for demonstration. The existing traffic signal settings are ineffective for controlling the observed traffic demand, and overflow occurs in short lanes. The optimized traffic signal settings applied to the proposed optimization algorithm effectively avoided traffic overflow. The resultant queuing dynamics are simulated using TRANSYT 15 Cell Transmission Model (CTM) to verify the proposed model. The model application is extended to handle the difficult residual queue scenario. It is found that the proposed model can optimize the traffic signal settings in cases where there are short initial residual queues.