<p>Shrimp farming sustainability is threatened due to diseases, increasing input cost, volatile market price, and climatic extremes. Adoption of on-farm nursery as pre-grow-out phase which supply quality seed to grow-out farming has been practiced by some of the shrimp farmers as smart farming strategy to minimize the risks. A comparative study was conducted among shrimp farmers who had used on-farm nursery (<i>n</i> = 60) vs direct stocking (<i>n</i> = 60) to ascertain the efficiency of the two-stage system. The findings indicated that incorporating on-farm nursery phase significantly enhanced farming efficiency, making it less prone to disease, market driven, more profitable, and sustainable (<i>p</i> ≤ 0.01). Further, this system reduced the crop period, increased the annual productivity with an additional crop, and produced 20&#xa0;g shrimp in 90&#xa0;days and 30&#xa0;g in 110–120&#xa0;days while direct stocked farms produced 20&#xa0;g shrimp in 110&#xa0;days with almost the same production cost. The expenditure on energy is reduced and profitability is doubled due to the premium price for the higher size shrimp produced in the system. Farmers using this system perceived that two-phase farming is an efficient strategy to ensure quality seed which minimize disease risks, market-driven farming, and enhancing farm profitability with increased farm gate prices. Therefore, this study recommends that integrating on-farm nurseries into the standard operating practices of shrimp farming and the extension service providers may sensitize and train the farmers to adopt. The government may extend financial support to popularize this model. Additionally, shrimp farmer groups can be encouraged to establish common nurseries to ensure planned supply of quality seed to facilitate phased stocking in the farming cluster and better alignment with the market demand while adapting to the climatic uncertainties.</p>