We develop a new systems modeling tool that integrates knowledge from hydrology, agriculture, and economics to understand the effect of small-scale irrigation on food security and groundwater sustainability in Ethiopia. Irrigation is an effective tool to mitigate climate impacts and improve agricultural yields. Small-scale irrigation, such as decentralized groundwater irrigation, is well suited for developing countries where small-holder farming communities are widely dispersed and can only afford small infrastructure investment. We study the underlying interdependencies between food and water systems in Ethiopia, where small-holder agriculture is the foundation of the nation’s economy and climate variability has led to great challenges to its food security. Our coupled market and crop model with groundwater module captures the interdependencies of climate, water availability, irrigation, crop yield, farmland allocation, crop production, transport, and consumption based on a system approach across multiple spatial scales. We study the implication of small-scale irrigation to Ethiopia’s food security and water resource conditions as a “what-if” question by comparing an irrigation scenario to the calibrated baseline in 2015, a year of significant drought and crop failure over a large portion of Ethiopia. Our model offers fresh insights into geographic disparities in outcomes that are driven by baseline climate variability, soil fertility, and market conditions. In general, we find that small-scale irrigation can potentially improve food security through increases in food consumption, but it requires policy support to direct the increases of production to domestic consumption while maintaining a sustainable groundwater condition. By using Ethiopia as an example, we show the strength of our model to study how water infrastructure resources support critical functions and service in water and food systems.