Not only is the reuse of wastewater, particularly for irrigation purposes, an increasingly common practice in developing countries, it is also encouraged by many governments and official entities. Although exposure to wastewater has noteworthy hazardous effects on human health and the environment, this is poorly understood by farmers who reuse wastewater for crop production. Using household-level survey data of 321 respondents, this study investigates the effects of wastewater reuse on farmers' perceived health risks and the determinants of farmers' reuse of wastewater for vegetable production in Punjab, Pakistan. A Zero-Inflated Poisson (ZIP) regression model shows that wastewater irrigation has a significant positive effect (P < 0.05) on farmers' perceived health risks. Farmers using wastewater have relatively little knowledge of its negative effects on human health compared to their counterparts using freshwater. Around 85% and 80% of farmers who used wastewater state that water scarcity and decreased production costs were the key reasons why they use wastewater for vegetable production, respectively. A logit regression model indicates that farmer age, household size, irrigation experience, income, access to institutional credit, awareness of health risks, access to canal water, ownership of tube well, and perceived health risks are the key determinants of wastewater reuse. The findings of this study and subsequent recommendations may guide policymakers in educating and updating farmers’ knowledge about the hazardous effects of wastewater through frequent training and workshops. Installation of plants for wastewater treatment by collecting a pollution premium from farmers seems to be a viable option for sustainable agricultural development.