Irrigation projects in sub-Saharan Africa are mostly unsustainable because of lack of maintenance by their users or government planners. By contrast, evidence shows that the smallholder farmers are developing and expanding the irrigated land, using their initiatives. Farmer-led irrigation, a revolutionary agricultural intensification approach, is already in progress with the magnitude to significantly transform the living standards of smallholder farmers. However, a rigorous assessment of its impact on household welfare to ascertain this is lacking. This paper bridges this gap by assessing factors influencing the adoption of this particular approach as well as its effects on the farmers’ per capita net crop income. Our data set consists of 608 smallholder farmers in Southern Tanzania and used propensity score matching to estimate the effects of adoption on the per capita net crop income. Our results indicate that the uptake of farmer-led irrigation practices is influenced by drought experience, water user group membership, farmer organization membership, and government extension, as well as the sex of the household head. Further, there was a positive and significant effect on the adopters’ per capita net crop income, thus encouraging the need to promote farmer-led irrigation as a complement to externally promoted innovations in achieving sustainable food security. This study, therefore, recommends that the government should support the farmers’ initiative by improving roads, removing market barriers, and helping farmers who have not yet taken up the initiative. Also, the government should enact regulations to make sure farmer-led irrigation initiatives do not harm the eco-environment such as protecting domestic water users. Finally, the government should leverage microservices to the farmers such as promoting affordable and appropriate credit facilities. It is necessary to continue pursuing this vein of research to gain information regarding the definite impact of the farmer-led irrigation on household welfare.