Improving irrigation efficiency (IE) is conventionally perceived as a water-conserving practice in the agriculture sector. The common understanding is that increased on-farm IE leads to an increase in water availability at the basin. However, in the recent past, many instances have been reported where increasing on-farm IE failed to increase water availability at the basin scale. This phenomenon is commonly known as the ‘Irrigation Efficiency Paradox (IEP)’. In this paper, we present a dynamic systems model of the IEP. Our model combines a simple mass-balance description of the water flows with the rent-seeking behavior of consumers. Through the socio-hydrological model, we arrive at a parametric characterization of the IEP, which is given by three attributes: the maximum short-term benefit enjoyed after improvement in IE, the time duration after which the paradox occurs, and the escalation of the paradox once it occurs. We find that the paradox in basins with lower evaporation and higher recharge is more pronounced, the policy implications of which are in contrast to the common narrative that seeks to reduce evaporation and increase recharge. We also use our findings along with global data sets to identify regions that are most susceptible to the IEP. We argue that much caution must be practiced while introducing efficient irrigation technologies in the identified regions so as to avoid paradoxical effects to as much extent as possible. We also discuss the seemingly counter-intuitive role of evaporation and recharge properties of the basin and how it ties in with contemporary policy narratives.