Located in the northwest of China, Xinjiang is a typical arid desert area and mineral resources development zone. The lack of water resources and a fragile ecological environment restricts the sustainable development of the region. Based on the industrial panel data of Xinjiang from 2001 to 2015, this paper uses the undesirable output SBM model, Malmquist index model, and Tobit regression model to comprehensively and systematically measure and evaluate the industrial eco-efficiency and its change characteristics from provincial, regional, and prefectural levels. The results show that (1) the industrial eco-efficiency level in Xinjiang is generally low, lower than the national average, but the development trend is good, and it has been steadily rising over time, from 2001 to 2015 and from the "Tenth Five-Year Plan" period to the "Twelfth Five-Year Plan" period. (2) The spatial distribution of industrial ecological efficiency of Xinjiang is not balanced. Northern Xinjiang is larger than that of eastern Xinjiang and the southern Xinjiang. The developments of 14 prefectures are uneven and asynchronous, which can be divided into two development modes: industrial and agriculture and animal husbandry region. (3) Through the decomposition analysis of the Malmquist index, it has been found that the technological progress index is the restriction factor of the changing trend of TFP, while the technical efficiency index and the pure technical efficiency index are the promoting factors. (4) The main factors causing the decline in ecological efficiency are industrial sulfur dioxide emissions, industrial nitrogen oxide emissions, total industrial water consumption, and general industrial solid waste. It can be seen that the emission of air pollutants and excessive industrial water are the main problems in the region. (5) Industrial ecological efficiency is positively correlated with industrial development level, scientific and technological innovations, industrial structure, and environmental planning, whereas negatively correlated with the degree of opening up and industrial agglomeration. (6) Xinjiang is an extremely arid and water-scarce region. These are the keys and prerequisites for saving water resources and strengthening the comprehensive utilization of water resources. Whether in the industrial areas or in the agricultural and animal husbandry areas, water conservation should be given top priority.