ABSTRACT Shortage in amount and variability in trends of rainfall, and crop failure are serious problems in developing countries like Ethiopia and in Hulbareg district in particular. Small- scale irrigation activities has been implemented by the rural households as a means of increasing productivity by reducing crop failure associated with erratic rain fed agriculture and ensuring smallholder farmers income though improving their production. This study was conducted to estimate the effect of small-scale irrigation of rural households’ income in Hulbareg district. In order to achieve the objective, primary data was collected in the way of questionnaire survey, group discussion and key informant interviews in three sample kebeles, and systematically and randomly selected 107 irrigation users and 124 non- users rural households. The propensity score matching technique was used to reduce the possibility of bias due to unobserved factors. Logit regression model was used to estimate propensity score and to identify determinants of rural households’ user in irrigation. The average user effect of small-scale irrigation on the income of the rural households was identified by using the nearest-neighbor matching with bandwidth-3. Estimated outcome variable was statistically significant at 1% level of significance and insensitive to unobserved factors. Irrigation user rural households in the district improved their income by Birr 38,458 than non- users. Thus, the study concluded that user in small-scale irrigation has significant positive effect on rural households’ income of irrigation users in the district. The result revealed that user in small-scale irrigation was significantly and positively affected by educational level of the household head, active family labor, extension services, credit access , livestock ownership of the household and market information services. But significantly and negatively affected by age of the household head.