Abstract: The plain areas of northwest inland basins have few precipitation and strong evaporation. In recent 50 years, the area of natural oases in the lower reaches of each basin has been shrinking. The Shiyang River Basin and the Aiding Lake Basin are taken as the research areas, and the main causes and mechanism for natural oasis degeneration in the downstream areas are examined in this paper. Based on the investigation of farmland areas, surface runoff from the mountains and its irrigation reference water, groundwater exploitation and surface runoff flowing into the downstream areas, in-situ monitoring of shallow groundwater level depth and soil moisture physical indexes in the vadose zone, unified measurement of groundwater levels, and the type and distribution range of natural vegetation based on the data obtained from remote sensing interpretation such as coverage and NDVI index, the above problems are studied by using the theory of watershed water cycle and water balance, time series analysis and geoscience multiple correlation analysis methods. The results show that (1) the root cause of the serious degradation of the natural oases in the lower reaches of northwest inland watersheds in recent 50 years is the lack of natural water resources, the main reason are the continuous increase of population and the large-scale diversion of surface runoff from mountains in the middle reaches. (2) The continuous expansion of irrigated cultivated land is the main driving factor for the shrinkage of the natural oasis area in the lower reaches. Every increase of 1.0 km² of irrigated cultivated land leads to the reduction of the natural oasis area in the lower reaches of the Shiyang River Basin and the plain area of the Aiding Lake Basin, which are 1.35−2.07 km² and 1.57−3.83 km², respectively. The drier the climate is, the less the annual runoff from the mountains in the upstream is, the greater the ratio of the runoff from the mountains blocked by irrigated farmland to the total runoff in the current year, and the less the surface runoff flowing into the downstream areas, resulting in the greater reduction of the area of natural oases in the downstream areas. (3) The degradation of natural oases in the northwest inland basins is controllable, but it is restricted by the lack of water resources. Under the background of lack of water resources, the scale of farmland water use driven by the current population is difficult to reduce. It is necessary to orderly promote the harmony between the scale of economic and social water use and the scale of natural oasis restoration and water supply. Therefore, the results of this study may provide an important scientific basis for the rational development and utilization of water resources and the restoration of natural oasis degradation in northwest China.