Reforms in irrigation management can make important contributions to reducing irrigation water scarcity. This paper attempts to examine the role of participatory irrigation management (PIM) in farmers’ mulched drip irrigation technology adoption decisions. It is based on a comparative analysis between government-promoted mulched drip irrigation technology (GMDIT) and localized self-governed mulched drip irrigation technology (LMDIT) in rural Xinjiang, China. Data from a survey conducted in 2017 across 739 households covering 1763 plots in Awati County in Xinjiang were used to estimate a nested logit model. The results indicate that PIM induces farmers to switch from traditional flood irrigation technology to GMDIT but does not promote the adoption of LMDIT. We conclude that promoting PIM can make an important contribution to more sustainable water use in this drought-prone area but that the self-governance of localized irrigation systems requires more attention by local governments.