Land degradation is a major challenge for sustainable development and poverty reduction across the world.

However, poverty does not need to always lead to land degradation and to subsequent vicious cycles exacerbating poverty.

Poor farmers have a stronger dependence on land, hence stronger incentives to sustainably manage it.

Reducing poverty by land management alone is challenging, requiring policies to address structural reasons for poverty.

Land degradation is a major challenge to sustainable development and poverty reduction across the world. This paper estimates the contribution of land degradation to the losses in agricultural profits in the four countries in Central Asia: Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. We used a production function approach to relate multiple factors including land quality to farmers’ profits; we evaluated the latter by combining hitherto unique nationally representative agricultural household surveys with remotely sensed data on land degradation hotspots. The findings show that land degradation that had occurred over the previous three decades reduced net farming profits among agricultural households by 4.8 times during the 2009–2010 cropping season compared with the case without land degradation. Land degradation reduced net agricultural profits of all categories of agricultural households in the region, both poor and rich. At the same time, contrary to widespread beliefs that poor agricultural households cannot cope with land degradation due to limited access to resources, the results also showed that the poor households applied more sustainable land management practices than the richer agricultural households. This is because they had a stronger dependence on land for their livelihoods; hence, had a stronger incentive to sustainably manage it. These findings mean that poverty does not need to inexorably lead to land degradation and to subsequent vicious cycles exacerbating poverty. At the same time, increasing poor farmers’ wealth by sustainable land management alone may be challenging, requiring additional accompanying policies to address structural and institutional reasons for poverty.