The purpose of this study was to identify the factors that influence the adoption and effectiveness of irrigation practices in the small-scale irrigation scheme(SSI) of Arefa and Babicha. SSI is one of the most useful irrigation systems designed to increase production and productivity and reduce risk related to rainfall variability. Both primary and secondary data sources were used. Data was collected by using a questionnaire, interviews, and field observations. Out of 232 beneficiary household heads, those who have access to irrigation, 70 sample respondents were selected with the random sampling method. The paper employed a multiple regression model for the analysis of factors affecting adoption and effectiveness of irrigation practices. A total of 18 explanatory variables under four factors (household demographic characteristics, capacity to invest, physical factors, and institutional factors) were included in the multiple regression. Among the four variables under household demographic characteristics, education and the age of the household head significantly influence the adoption of irrigation. Two explanatory variables under capacity to invest (estimated household income and total irrigable land) had a significant influence on irrigation adoption. The physical incentive factor includes three variables that play important roles in irrigation practice adoption: plot distance from an irrigation water source, transportation access, and soil fertility. Access to extension services and credit user availability under institutional factors also influence the adoption of irrigation practices. This study identifies the challenging contexts for irrigation projects, examines how the challenging contexts influence the effectiveness of irrigation projects, and suggests ways of improving the effectiveness of irrigation projects. Poor attention given to local knowledge in planning and implementation of SSI practices results in poor ownership by the local communities. Long decision-making processes accompanied by a lack of governance capacity and accountability are critical challenges for the effectiveness of irrigation practices. As a result, policymakers must consider these factors when planning irrigation activities in order to tackle poor adoption and improve effectiveness of irrigation practices.