Global warming has led to a serious crisis on regional water resources. Establishing a decision support system (DSS) on the sustainable utilization of water resources for arid areas is an increasingly critical problem. Selecting Xinjiang as a case study, this paper developed a system dynamics (SD) model. Through the simulation operation of the model, we achieved the decision on sustainable utilization of water resources. The extensive economic development is the main factor restricting the sustainable utilization of water resources in Xinjiang. We propose to adjust the planting structure and implement water-saving irrigation in Xinjiang, especially the Tarim Basin and Turpan-Hami Basin. This research provides the sustainable utilization plan of water resources for Xinjiang and its sub-regions in the next 30 years. By 2050, we recommend that the reuse rate of urban domestic water consumption and industrial sewage should reach 75%; the rural domestic water quota should be 70 L/(person*day); water consumption per industrial output value of ten thousand Yuan should be 28 m3; the irrigation water quota should be 5000 m3/hectare in Xinjiang. This research can provide references for the decision on sustainable utilization of water resources in arid regions around the world.