This paper examines the impact of irrigation on rural incomes, poverty and the income distribution in rural China. The relationship between irrigation and income is examined using descriptive statistics and multivariate analysis. A simulation approach is used to explore the impact of irrigation on poverty incidence. To uncover the effect of irrigation on the income distribution, inequality is decomposed by source of income, by group according to access to irrigation and by estimated income flows as a result of specific household characteristics. The results show that irrigation increases income and reduces poverty and inequality.