Poor irrigation water management associated with water scarcity is the major reason for underperformance of most small-scale irrigation schemes in Ethiopia. In order to devise appropriate measures for rehabilitation of the failing schemes and to enhance farmers’ adaptation capacity to water scarcity, it is important to assess site specific plot and scheme level water management practices, challenges, farmers’ perceptions and adaptation strategies. So far, there is no such study in the context of Tigray, Ethiopia. A survey was conducted on 109 farmers in three groups based on the source of irrigation water, which included canal, seepage and both canal and seepage water users. Focus group discussions with elders, water users association (WUA) committee and women headed households were also made. Furthermore, random field measurements on conveyance loss, groundwater depth and quality (EC) were also taken to verify the farmers’ perception. The respondents’ perception of severe water scarcity at scheme level and poor on-farm and scheme level water management practices are among the major causes for aggravating water scarcity, crops yield decline and soil salinization were in line with field observations. Despite several adaptation strategies of the farmers at plot and at scheme level, yield is still declining. The only adaptation strategy that has been enforced by the local government authority was reduction of the irrigated land. However, in the 2016 irrigation season the farmers were allowed to make their own decisions that resulted in innovative water scarcity adaptation strategies and that doubled the irrigated land as compared to the local authority plan. This showed the significance of allowing the beneficiaries to make their own decisions. To rehabilitate Gumselassa irrigation scheme as well as to enhance the adaptation capacity of the farmers to water scarcity capacity building and empowerment of the WUA and improvement on the existing water structure is required.