Agriculture green development faces the challenge of balancing the application of both organic and chemical fertilizers. Formulating effective policies to harmonize these applications is essential for ensuring food security and environmental sustainability. However, there is a lack of studies investigating the economic and environmental benefits of policy implementation at the grid scale, and insufficient research has been conducted on the subsequent impacts these policies have on diverse crops. Therefore, this paper develops the SIMPLE-G-Heihe model to simulate the impacts of green agricultural policies on multiple crops planting in arid regions. This model addresses limitations found in the SIMPLE-G model, which supported a single crop and lacked organic fertilizer substitution simulation. The results show that: (1) Merely increasing subsidies for organic fertilizers is insufficient to significantly enhance yields, and improving the efficiency of fertilizer utilization should also be emphasized. (2) Combining improvements in fertilizer technology with subsidies for organic fertilizers can concurrently support economic advancement and environmental mitigation. Research indicates that integrating a 3% organic fertilizer subsidy with an 8% improvement in chemical fertilizer technology increases vegetable output value by 0.27% and reduces N2O emissions by 1.09%. (3) The upstream areas of the Heihe River Basin show a significant reduction in fertilizer use. Fertilizer input is mainly reduced for vegetables in the upstream areas, while for wheat and maize, the reduction is primarily in the midstream and upstream areas. The findings discuss the spatial heterogeneity and flexibility of policy impacts, providing valuable insights for the implementation of green agriculture strategies in China.