In northern Ethiopia, potatoes are frequently cultivated with excessive irrigation water. Water is a scarce and expensive resource in semi-arid environments, so it is critical to create irrigation technology that enhances water efficiency and availability, as well as to implement better irrigation management methods. A field experiment was conducted for the years in 2018/19 and 2019/20 to investigate the effects of water deficit on potato yield, water productivity, and net income. Deficit irrigation treatments affected yield and yield-related components, but were not statistically different in all cases. Each treatment had important effects on tuber yield, water productivity, and plant height. Tuber yield was best in the non-deficit treatments (T1). In most cases, the variations in tuber production and plant height between initial, late season (25% deficit), other stages with full demand, and non-deficit treatments were small and statistically insignificant. The highest water productivity and irrigation water productivity were obtained at 25% deficit treatment (T3) in the initial and late-season stages. Under limited land and water, the 25% deficit treatment (T3) offered the best net financial benefits in initial and late season stages of potato production. These findings are valuable for making policy decisions about appropriate irrigation and water management under water-stressed conditions that maximize net economic benefits from limited land and water resources.