A field experiment was conducted to assess the suitability of saline water for irrigation, and to know the irrigation water requirement of groundnut-wheat cropping sequence in hyper-arid region of Rajasthan. In this split-plot experiment, the main plots had four levels of irrigation water salinity (ECiw0.25 (Best available water, BAW), 4, 8 and 12dS.m-1); and the sub-plots had combinations of two treatments on drip lateral spacing of 0.60 m and 0.90 m with 0.30 m emitter spacing, and three levels of irrigation water application (0.6, 0.8 and 1.0 times of pan evaporation (PE)). The highest biological yield (grain + straw) of groundnut and wheat recorded in BAW was statistically at par with irrigation water salinity level of 4 dS.m-1. Higher irrigation water salinity levels (8 and 12 dS.m-1) and placement of laterals at 0.90 m led to significant reduction in biological yield. In monetary terms, use of BAW resulted in highest B:C ratio of 1.73 for groundnut-wheat cropping sequence, while ECiw 4 dS.m-1 showed B:C ratio of 1.70. Highest crop yields, gross return and B:C ratio were observed under 0.60 m lateral spacing and irrigation application at 1.0 PE. Interaction effect of salinity of irrigation water and lateral spacing on yield and yield attributes was significant for both crops. Study demonstrated that the salinity limit of 4 dS.m-1 can be considered as threshold irrigation water salinity for drip irrigated groundnut and wheat crops in hyper-arid region of Rajasthan.