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This paper presents an analysis of economics of rainwater harvesting by poor farmers in Tanzania. A questionnaire was used to survey 120 households to obtain information on the performance of their enterprises over 6 years (1998-2003). The information was mainly based on recollection as few farmers kept detailed records. Actual monitoring and measurements of yield and inputs was done in the farmers’ enterprises over 2 years during 2002/2003 and 2003/2004 production seasons. The analysis was done for four categories of rainwater harvesting systems differentiated by the size of catchments from which water is collected and the intensity of concentration and/or storage of the collected rainwater. These categories are: micro-catchments, macro-catchments, macro-catchments linked to road drainage and micro or macro-catchments with a storage pond. Results show that rainwater harvesting for production of paddy rice paid most with returns to labor of more than 12 US$ per person-day invested. These benefits are very high due to the fact that without rainwater harvesting it is not possible to produce paddy in the study area and rainfed sorghum crop realizes a return to labor of only US$ 3.7 per person-day during above-average seasons. For the rainwater harvesting systems, those designed to collect water from macro-catchments linked to road drainage, performed best during both categories of seasons. The results also show that contrary to expectations, improving rainwater harvesting systems by adding a storage pond may not lead to increased productivity. Another finding that goes against the widely held belief is that rainwater harvesting results in more benefits during the above-average seasons compared to below-average seasons. It is therefore, concluded that there is a potential for combining rainwater harvesting with improved drainage of roads. The construction of rural roads in semi-arid areas can beneficially be integrated with efforts to increase water availability for agricultural needs. (c) 2005 Published by Elsevier B.V.