Canopy interception and its evaporation into the atmosphere during irrigation or a rainfall event are important in irrigation scheduling, but are challenging to estimate using conventional methods. This study introduces a new approach to estimate the canopy interception from measurements of actual total evapotranspiration (ET) using eddy covariance and estimation of the transpiration from measurements of sap flow. The measurements were conducted over a small-scale sprinkler-irrigated cotton field before, during and after sprinkler irrigation. Evaporation and sap flow dynamics during irrigation show that the total ET during irrigation increased significantly because of the evaporation of free intercepted water while transpiration was suppressed almost completely. The difference between actual ET and transpiration (sap flow) during and immediately following irrigation (post irrigation) represents the total canopy evaporation while the canopy interception capacity was calculated as the difference between actual ET and transpiration (sap flow) during drying (post irrigation) following cessation of the irrigation. The canopy evaporation of cotton canopy was calculated as 0.8 mm, and the interception capacity was estimated to be 0.31 mm of water. The measurement uncertainty in both the non-dimensional ET and non-dimensional sap flow was shown to be very low. Copyright © 2015 John Wiley & Sons, Ltd.