Rainfall gauges are always sparse in the arid and semi-arid areas of Northwest China, which makes it difficult to precisely study the characteristics of drought at a large scale in this region and similar areas. This study used the TRMM (The Tropical Rainfall Measuring Mission) multi-satellite precipitation data to study the spatial-temporal evolution of drought in the Loess Plateau based on the SPI (Standardized Precipitation Index) drought index for the period of 1998–2014. The results indicate that the monthly TRMM precipitation data are well matched with the observed precipitation, indicating that this remotely sensed data set can be reliably used to calculate the SPI drought index. Based on the study findings, the average precipitation in the Loess Plateau is showing a significant increasing trend at the rate of 4.46 mm/year. From the spatial perspective, the average annual precipitation in the Southeast is generally greater than that in the Northwest. However, the annual precipitation in the Southeast area is showing a decreasing trend, whereas, the annual precipitation in the northwest areas is showing an increasing trend. Through the SPI analysis, the 3-month SPI and 12-month SPI were both showing an increasing trend, which indicates that the drought severity in the Loess Plateau was a generally declining trend at a seasonal to annual time scale. From the spatial perspective, the SPI values in the Central and Northwest of the Loess Plateau were significantly increasing, whereas, the SPI values in the southern area of the Loess Plateau were slightly decreasing. From the seasonal characteristics, the high-risk area for drought in the spring was concentrated in the northeast and southwest part, and in the summer and autumn, the high-risk area was transferred to the south part. Through this study, it is concluded that the Loess Plateau was likely getting wetter during the time period since the Grain-for-Green Project (1999–2012) was implemented, which replaced much farmland with forestry. This is a positive signal for vegetation recovery and ecological restoration in the near future.