Influence of water application uniformity of irrigation systems on crop yield has been well documented, but effects of runoff on water distribution in a field and on yield have been less studied. The objective was to determine the effect of runoff on water distribution and peanut (Arachis hypogaea L.) yield in a field irrigated with a lateral moving sprinkler irrigation system (MSIS). The experimental field with silt loam soil (300 by 120 m; 3% slope) was located in the Negev, Israel. The treatments were: (i) microbasins along furrows, where runoff was trapped by the microbasins and penetrated into the soil later, and (ii) the control, where runoff was allowed to move downhill. In each treatment, pod and canopy yields and soil water content were measured at different sites along the slope. Surface runoff from 3−m2 plots in the control treatment was low at the beginning of the growing season and increased to an average of 37.5% in later irrigations. The microbasins increased the uniformity of soil water content along the slope. In control plots, soil water content was higher downhill than uphill because of runoff. Pod and canopy yields in the microbasin treatment were fairly uniform along the slope (CV of 1.3 and 2.8%, respectively). In contrast, pod and canopy yields increased in the downhill direction in control plots (CV of 8.6 and 15.5%, respectively). Preventing runoff improved the distribution uniformity of available water in the field, and increased average pod yield by 880 kg ha−1.