A pot experiment was conducted to investigate the effects of two irrigation water sources: treated wastewater (TWW) and fresh water and two soil moisture levels (100% and 60% of available water capacity (AWC) on the essential oil yield and percentage and growth parameters of sage plants (Salvia officinalis L.) grown in degraded soil. Sage plants were cultivated for 90 and 180 days at planting densities of 70 and 50 plants per pot, respectively. Despite both water sources being classified as C3-S1, no significant short-term effects on soil properties were observed after 90 or 180 days. After 90 days, TWW at 100% AWC significantly increased plant height and leaf fresh and dry weight compared to other treatments. Similar trends were observed at 180 days, regardless of planting density. Additionally, SPAD significantly increased at 100% AWC, regardless of water source. Treatments significantly affected the essential oil yield and percentage of sage plants grown for 90 and 180 days. TWW at 100% AWC resulted in the highest essential oil yield, which was significantly higher than other treatments. Unexpectedly, irrigation with TWW at 60% AWC resulted in the highest oil percentage after 90 days. However, after 180 days, TWW at 100% AWC led to a significantly higher essential oil percentage compared to fresh water at 100% AWC. Under the conditions of fresh irrigation water scarcity and degraded soils, low-income local communities can grow sage for essential oil production using TWW at 60% AWC since under the conditions of the present study such practice resulted in a higher essential oil percentage.