Water-saving in agriculture is critical for building a water-conserving society. However, the application of high-efficiency water-saving technology in agriculture may create a paradox of irrigation efficiency. Efficiency improvement in agricultural water utilization may not lead to the expected agricultural water-saving. In this paper, a rebound intensity model of the irrigation efficiency paradox is established and combined with remote sensing measurement to verify the irrigation efficiency paradox caused by expanding the irrigation area in the Shenwu Irrigation Area, China. Based on ideas in the principal–agent theory and stakeholder theory, it is concluded that the essence of the irrigation efficiency paradox is the conflict of interests among stakeholders with asymmetric information due to inadequate regulatory capacity. A dual principal–agent model is formulated to optimize the conflict among heterogeneous stakeholders in the paradox. The results show that the paradox should be restrained by a suitable distribution mechanism of water-saving gains, improved irrigation water metering, and enhanced water-use monitoring.