Water scarcity is a major challenge in agriculture, particularly in regions reliant on irrigation for crop growth, such as deserts. Traditional irrigation methods, which often follow fixed schedules and manual observations, result in inefficient water application. Soil moisture sensors could offer a solution by providing real-time data on soil moisture levels, enabling more precise irrigation scheduling based on actual demands rather than estimations. This study evaluates the impact of integrating soil moisture sensors into irrigation systems to enhance water efficiency and agricultural productivity. The field study was conducted in the Thal Desert (Punjab), Pakistan, where water management is critical due to scarcity. The study compares the two irrigation methods—traditional and sensor-based—over 10 months in multiple crop fields. Weekly soil moisture data were collected at various depths, alongside measurements of water applied, irrigation frequency, crop yield, and soil health indicators. Statistical data were analyzed using ANOVA to assess the effectiveness of both irrigation methods. The results show that the sensor-based irrigation method led to a 20–30% reduction in water consumption compared to traditional methods, while simultaneously enhancing crop yield by 15–25%. These findings demonstrate that soil moisture sensors, even actuating once a week, significantly improve irrigation efficiency, reducing water consumption and boosting crop productivity. These results make the soil sensor-based irrigation systems a promising solution for water management in water-scarce regions.