Improving water productivity can make a sterling contribution to global food production and poverty alleviation. Groundwater has always been a critical resource for agriculture. Scientific understanding of water productivity can help address water scarcity concerns through more productive use of scarce water resources and higher socio‐economic benefits from available water. This study examined the water productivity in the Al Batinah region of Oman using farm‐level data. In total 124 crops grown during the 4 years 2005–2008 were examined. Field studies were carried out for 4 years (2005–2008) on 18 field plots to examine yield, inputs, irrigation, costs and economic return of sweet melon, sweet pepper, cabbage and tomatoes grown under drip irrigation vs Rhodes grass grown under sprinkler irrigation using groundwater. The aim was to identify suitable combinations of vegetable crops grown under drip irrigation that can maximize the profitability of the farmers by optimizing water productivity. Results from the 4‐year data show that tomato and cabbage performed better than sweet pepper or melon as far as water productivity was concerned, while the drip irrigation method had shown better performance than sprinkler irrigation. Average crop water productivity was estimated at 7.8 and 11.9 kg m‾3 for the cabbage and tomato crops, respectively. The cabbage crop also gave the highest gross return of RO105 for each riyal Omani (RO 1.00 = US$2.59 in June, 2005) of investment in irrigation water. It has also been analysed that the drip irrigation system performed better in terms of crop water productivity and economic water productivity per cubic metre of water applied. So the research results represent decision‐making options of vegetable growers at farm scale but also offer important insights for the adoption of the drip irrigation system as well as the design of water policy incentives for irrigation modernization in Oman and other water‐scarce regions. Copyright © 2012 John Wiley & Sons, Ltd.