The choice of an appropriate cropping system is critical to maintaining or enhancing agricultural sustainability. Yield, profitability and water use efficiency are important factors for determining suitability of cropping systems in hot arid region. In a two-year field experiment (2009/10–2010/11) on loam sandy soils of Bikaner, India, the production potential, profitability and water use efficiency (WUE) of five cropping systems (groundnut–wheat, groundnut–isabgol, groundnut–chickpea, cluster bean–wheat and mung bean–wheat) each at six nutrient application rate (NAR) i.e. 0, 25, 50, 75, 100% recommended dose of N and P (NP) and 100% NP + S were evaluated. The cropping systems varied significantly in terms of productivity, profitability and WUEs. Averaged across nutrient application regimes, groundnut–wheat rotation gave 300–1620 kg ha−1 and 957–3365 kg ha−1 higher grain and biomass yields, respectively, than other cropping systems. The mean annual net returns were highest for the mung bean–wheat system, which returned 32–57% higher net return than other cropping systems. The mung bean–wheat and cluster bean–wheat systems had higher WUE in terms of yields than other cropping systems. The mung bean–wheat system recorded 35–63% higher WUE in monetary terms compared with other systems. Nutrients application improved yields, profit and WUEs of cropping systems. Averaged across years and cropping systems, the application of 100% NP improved grain yields, returns and WUE by 1.7, 3.9 and 1.6 times than no application of nutrients. The results suggest that the profitability and WUEs of crop production in this hot arid environment can be improved, compared with groundnut–wheat cropping, by substituting groundnut by mung bean and nutrients application.