The study analysed effect of the Third National Fadama Additional Financing project on the output and poverty levels of rice farmers in Enugu state, Nigeria. Multi-stage random sampling technique was used to select 240 respondents (120 Fadama and 120 non - Fadama rice farmers). Data for the study were collected through a structured questionnaire as well as field observation and analyzed using descriptive statistics and Z-test analysis. Results showed that 60.0% (Fadama farmers) and 61.7% (non-Fadama) farmers were males, both farmer groups had mean household sizes of 6 persons and mean annual income ofN479, 398.37 (Fadama farmers) and N179,426.80(non - Fadama farmers). Results indicate that Fadama farmers had mean rice output of 2014.58kg/ha as against 802.50kg/ha for non-Fadama farmers, Poverty status showed that 67% and 71.0% of Fadama and non – Fadama farmers were poor, while 53.0% (Fadama farmers) and 49.0% (non – Fadama farmers) were non poor. Results of Z-test on rice output and poverty levels showed that there were significant differences in rice output and poverty levels of Fadama and non – Fadama rice farmers at (Z= p<0.01)in the study area. The study recommended prompt delivery of farm inputs, payment of counterpart funds by Federal, State and Local Governments and extension of the project to non-beneficiary communities in order to increase rice output and reduce poverty.