Water resources are essential for agricultural production in the grain-producing region of China, and water shortage could significantly affect the production and international trade of agricultural products. China is placing effort in new policies to effectively respond to changes in water resources due to changes in land use/land cover as well as climatic variations. This research investigates the changes in land, water, and the awareness of farmer vis-à-vis the implementation of water-saving policies in Zhangye City, an experimental site for pilot programs of water resources management in China. This research indicates that the water saved through water-saving programs and changes in cropping structure (2.2 × 108 m3 a-1) is perhaps lower than the newly increased water withdrawal through corporate-led land reclamation (3.7 × 108 m3 a-1). Most critically, the groundwater withdrawal has increased. In addition, our survey suggests that local government is facing a dilemma of water conservation and agricultural development. Therefore, the enforcement of the ban on farmland reclamation and irrigation water quotas in our study area is revealed to be relatively loose. In this vein, the engagement of local stakeholders in water governance is essential for the future sustainable management of water resources.