Several agroforestry-based peatland restoration models are currently being implemented. However, comprehensive evidence analysing farmers’ perceptions, willingness to invest (WTI), and cost-benefit insights remains limited. Addressing this gap is essential for optimising sustainable peatland restoration. Therefore, this study aimed to analyse perceptions of peatland and agroforestry models, examine the factors determining farmers’ WTI, and calculate the costs and benefits of agroforestry systems on peatlands. The study was conducted in Perigi Village, Pangkalan Lampam District, and Perigi Village, Kayu Agung District, Ogan Komering Ilir Regency, South Sumatra, Indonesia, where farmers had practised agroforestry for more than five years. Data were collected through a survey of 85 respondents and analysed using tabulation analysis, logit model, and cost-benefit analysis (IRR, NPV, Net B/C, and Gross B/C). The results showed that the majority of respondents perceived agroforestry schemes as an effective method for enhancing productivity by combining various commodities, including agrosilviculture, agrosilvofishery, and agrosilvopastoral systems. These systems were also considered capable of increasing farmer incomes and reducing peatland degradation. Approximately 72% of smallholder farmers in Indonesia were willing to implement the agroforestry model. Factors such as indigenous status, education, production planning, and farmer group activity positively influenced WTI, while dominant land use patterns and knowledge of agroforestry had negative effects. The optimal implementation of agrosilviculture systems, compared with agrosilvofishery and agrosilvopastoral, was necessary for sustainable development. This study suggests promoting smallholder farmers’ adoption of agroforestry practices through improved decision-making support, social proximity, technical information, welfare benefits, and addressing productivity constraints.