Abstract: Development of a clear understanding of the relationship between the availability of dam-driven irrigation water and crop revenue is important in poverty reduction and food security process. As a result, large research efforts are devoted to understanding the relationship between the availability of irrigation water and crop revenue. However, earlier studies do have several limitations. For example, without considering its indirect effect, prior studies focused solely on the direct effect of availability of irrigation water on crop revue. In this study, using a structural equation model analysis, the direct and indirect effect of availability of dam-driven irrigation water on crop revenue is decomposed and quantified specifically for the Koga irrigation scheme, located in the Mecha district of Amhara region in Ethiopia. A primary data set was collected from a randomly selected sample of 450 households in the Koga irrigation scheme. More than half of the households (254) are supported by the Koga Dam irrigation water during the dry season, and the other 196 households depended only on rainfall. The results of the study showed that, in addition to its direct effect, the availability of irrigation water indirectly affected crop revenue through receptivity of the farmers to use modern farm inputs. Around 27 percent of the total effect of dam-driven irrigation water on crop revenue was mediated by farmers’ receptivity to use yield-enhancing modern farm inputs. The results of this study suggested that the availability of irrigation water is essential to improve both crop revenue and receptivity of the farmers to use modern farm inputs. This finding also drives a strategic framework that the receptivity of the farmers to use modern farm inputs is crucial for utilizing the positive effects of irrigation water availability on crop revenue.