Frequent drought and adverse economic conditions are the major problems faced by the irrigation sector in the semi-arid areas of sub-Saharan Africa. In this paper, a bioeconomic multiagent system (MAS) was developed to analyze different policy instruments that could improve irrigation farming and reduce rural poverty in the Upper East Region of Ghana. To better quantify the level of poverty and its distribution, the household decision model included a threestage budgeting system (namely a savings model, a Working-Leser model, and an Almost Ideal Demand System). The agent-based model was applied to a sub-basin of the White Volta River in Ghana and calibrated and validated using survey data collected in 2005. With the help of simulation experiments, we analyze the potential impacts on household welfare and poverty distribution when relaxing the cash constraints and increasing the off-farm income opportunities in the region. Simulation results suggest substantial increases in income and consumption levels of those households that are having irrigation plots but not for poor households cultivating only rainfed plots. The scenario analyses also show increased application rates of mineral fertilizer when households have better access to credit, which may help to restore the sustainability of cropping systems. Our results imply that increasing public investment to provide irrigation plots to the farming community together with more favorable economic incentives might bring about the intended results of poverty reduction as well as diversification of agriculture.