The Watermelon Carnival is Water Valley's most cherished annual event, attracting an estimated 20,000 attendees every year during the first weekend in August. Recognized by the Southeastern Tourism Society as one of the top 20 festivals in the southeastern United States, the carnival has a rich history.

The first Carnival was held August 27, 1931, during the Great Depression. Water Valley, like similar small towns, was in a precarious position. Crops failed to yield sufficient profits, and industry was sparse. However, a group of enterprising businessmen who had formed the Water Valley Junior Chamber of Commerce saw untapped potential in an unexpected source: the watermelon, a crop that thrived in this area and was renowned for its exceptional quality.

The event surpassed all expectations. Press reports from the time highlighted that early on Thursday morning, cars began streaming into Water Valley, with the crowds continuing to swell throughout the day until the town was filled with 12,000 to 20,000 people. These festivities continued for nine years but were paused at the onset of World War II. The carnival then lay dormant until its revival in 1980.

Today, the Watermelon Carnival is a vibrant weekend-long celebration. It serves as a homecoming for many, offering a chance to reunite with family and old classmates. Festivities kick off on Friday with a Street Dance and a fireworks display at City Park. Saturday is packed with continuous entertainment, food vendors, arts and crafts booths, contests, parades, an antique car show, a 3K run, and much more.