Yanghe Watershed has low annual rainfall, uneven spatial and temporal distribution, extreme shortage of water resources in some areas. The contradiction between supply and demand of water for agricultural production is prominent and the expected production value cannot be achieved. Therefore, it is necessary to investigate the supply and demand of agricultural water resources and the impact of green water on agricultural crops in Yanghe Watershed. This article proposes a new crop economic model for increasing the green-water footprint to blue-water footprint ratio (GWF:BWF) in accordance with the regional characteristics, alleviating agricultural water shortage in irrigation areas, optimizing water resource allocation, and achieving sustainable agricultural development. The proposition is based on a study of five crops in eight districts and counties in the Yanghe River watershed. By combining the economic model F with a crop water production function, we achieved 89.3%, 88.9%, 97.1%, 81.5%, and 87.0% of the optimal water demands of the five crops, respectively, and effectively improved the underground irrigation of crops and the water resource utilization efficiency. The GWF:BWF threshold interval was subsequently selected based on the temporal changes in the BWF and GWF in the study area. This enabled significant reduction of the planting area of blue-water crops and increase in the proportion of green-water crops, while also improving the agricultural economy of the Yanghe Watershed. The proposed model promises to afford enhanced management of agricultural irrigation areas that experience rainfall shortage. © 2023 The Authors. Journal of The Science of Food and Agriculture published by John Wiley & Sons Ltd on behalf of Society of Chemical Industry.