China’s arid Northwest region has a unique inland water cycle that maintains a fragile balance. Water resources in this area come from high mountain glaciers, seasonal snowmelt, middle mountain precipitation, and water emanating from fractured bedrock in the lower mountains. The region’s main problems with water resource development involve water shortages arising either from natural causes (i.e., climate and weather anomalies) or from engineering projects, including industrial and domestic wastage. Besides, we analyzed the spatial and temporal variations of irrigation water demand as well as crop water requirement, the results suggested that the demand of irrigation water in the arid region of Northwestern China showed increasing trend during the past two decades, which mainly caused by fast increase in cotton cultivation areas, because irrigation water requirement for cotton was much larger than the other crops. To resolve these issues, the following water resource management countermeasures are suggested: the construction of water management systems and mechanisms; the reformation of the current water resource management system; changes in water management properties; the unified management of surface and groundwater; the reduction of use; and the broadening of water sources.