We study the impacts of 1,500 large-scale irrigation projects that have affected more than 250,000 villages in India. To do so, we use high-resolution spatial data, and exploit discontinuities in program inclusion arising at project boundaries. Irrigation increases agricultural output and population density in rural villages. However, in and near towns, it causes a decline in indicators of development including population density, nightlight density, built-up area, and firm employment, reallocating productive factors away from non-agricultural activities. Results are consistent with a model in which the local effects of agricultural productivity gains depend substantially on the spatial organization of the economy.