Northwest China (NWC) is one of the driest areas of the world. Over the past decades, NWC has experienced rapid socio-economic development, further stressing its freshwater quantity and quality. However, there is little knowledge on the long-term status of NWC’s water resources and the anthropogenic impacts—positive (environmental policies) or negative (uncontrolled development). We present a holistic spatiotemporal assessment of NWC’s water quantity, water scarcity, and water quality based on water use intensity (WUI), water scarcity index (WSI), and statistical analyses and tests, combining multiple datasets spanning the past two decades. Moreover, we analyze the impacts of socio-economic development on water resources and mention the relevant governmental efforts and policies to preserve NWC’s water resources. NWC’s water use was found to be unsustainable, having significantly increased by 10% over the past two decades, but without being able to adequately cover the needs of most sectors. Our results also reveal water scarcity inequalities among NWC’s provinces; perennial water scarcity exists in Xinjiang and Ningxia Provinces, and there is no water stress in Qinghai. A remarkable wastewater treatment rate (from 27.3% in 2003 to 97.1% in 2020) and river water quality improvement have been achieved under continuous efforts, huge restoration and water pollution control investments. However, water shortages are a persistent issue. Balancing the water availability and demand will be crucial to achieve a truly sustainable development.