"[These include] letting the water settle in a pond, so a lot of the eggs from worms drop out of the water, and irrigating around the crops rather than on top of them.
"When the crop is harvested, it also needs to be washed with fresh, clean water in the market, and that water needs to be constantly changed so everything else is not contaminated," the Institute said in a report presented at the World Water Week summit in Stockholm, Sweden.
As the world is getting increasingly urbanized, pressure to tap water from whichever source available also increases. And the drainage water comes in handy. But not many seem to realize the risks involved, the Institute said.
The study, based on case studies from 53 cities in developing nations, examined where wastewater was being generated, how much was being used in urban agriculture, and to what degree the water was being treated. It found that wastewater was being used in 80% of the cities surveyed.
With increasing food prices and growing concerns about water scarcity, innovative measures were indeed welcome.
Wastewater irrigation allowed for food production in places where there was a lack of water, or where no alternative clean water sources were available.
It also recycled nutrients, meaning that farmers did not have to buy expensive fertilisers.
And irrigating farmland with wastewater also has environmental benefits, explained IWMI Director General Colin Chartres.
"It is a pretty useful way of treating water in the sense that if the water just went straight into a river, it would cause a lot more eutrophication problems further downstream.
"So in a way it is performing an ecological service by cleaning up some of the water and recycling the nutrients."
However, he cautioned, "If this practice is going to be increasingly commonplace and more and more people are going to be eating food produced this way, then there needs to be a bit more concern about the heavy metals and other contaminants in there."
The IWMI report added that very often industrial and domestic waste streams were mixed together. Ensuring the two were kept apart would reduce the risks from chemical contamination.
"It is really just about minimising the risks from field to fork with a series of simple measures," Dr Chartres explained.
The authors said that the international community needed to develop policies and practices to reduce the health and environmental risks, while maintaining the financial and food production benefits.