A significant increase in pesticide use has increased concerns about potentially adverse effects on human health and the environment, particularly in countries where regulations are not strictly implemented and farmers’ knowledge of safe handling procedures is often inadequate. This paper assesses the potential risk of pesticide use by smallholder farmers in the Cagayan Valley, North-East Luzon, the Philippines, by examining pesticide usage, application methods, pesticide drift and health effects among farmers with different levels of income and market access. About 104 farmers growing rice and corn were interviewed and spray drift and exposure of operators was measured when 22 rice farmers sprayed with water using their knapsack equipment. Twenty different pesticides freely sold in stores or markets were encountered in the study, 9 of which are classified as ‘highly hazardous’ or ‘moderately hazardous’ and at least 6 as restricted use pesticides. Farmers mostly at risk had the highest income and largest farms. By walking through crops, farmers’ legs were most seriously exposed to pesticide deposition. The experimental results agreed with farmers’ affirmative response to questions about their suffering various symptoms of poisoning. Estimates of pesticide concentrations in watercourses exposed to drift suggest that aquatic species will suffer adverse effects up to at least 2.0 m from field borders. Hazard quotients suggest that pesticide application rates are not toxic to honeybees exposed to drift up to 1.5 m from sprayed fields. Approval of pesticides needs to distinguish between restricted and general use pesticides. Recommendations are made for controlling pesticide use and its impacts, modifying the integrated pest management programme and redesigning pesticide policies.