Collective action through rural producer marketing organizations can be significant for improving smallholder welfare thus contributing to rural economic growth and poverty alleviation. The purpose of this paper was to examine the impact of farmer group membership on smallholder welfare and poverty. The study compared farmers in producer-marketing organizations and non-members involved in growing mango from the eastern part of Kenya. Propensity score matching method was used to estimate the average treatment effect of group membership on smallholder welfare and poverty. The heterogeneity across propensity score and farm size for the estimated impact were also determined using the smoothing differencing method. A total of 600 households were interviewed comprising of 400 non-members and 200 members. The study shows that group membership significantly improves smallholder total household income and asset holdings, and reduces poverty. This effect is significant for medium-scale farmers participating in collective action as compared to poor small-scale and large-scale farmers. The important factors which determine smallholder participation in collective action include human capital such as age and education level of the household head, market access, natural and physical capital such as total farm size and number of other crops grown. This study expands on the current literature about the effect of collective action on smallholder welfare by investigating the impact on asset holdings and poverty in addition to the total household income.