Seed cotton yield and fiber quality are two primary factors that influence the international competitiveness of cotton. To enhance the water-nitrogen utilization efficiency and promote the sustainable cotton production, field experiments were performed in 2020 and 2021 to explore the effects of irrigation depth and nitrogen (N) fertilization rate on N uptake and distribution, seed cotton yield, fiber quality traits and water-nitrogen utilization efficiency in the Korla region of southern Xinjiang, China. Three irrigation depths (W1: 60% ETc, W2: 80% ETc, W3: 100% ETc; ETc was crop water consumption) and four N rates (N0: 0 kg ha−1, N200: 200 kg ha−1, N300: 300 kg ha−1, N400: 400 kg ha−1) were applied. The results showed irrigation depth and N rate significantly influenced N uptake and distribution in plant organs, seed cotton yield, crop water productivity (WP), partial factor productivity of nitrogen (PFPN) and some fiber quality traits. Increasing irrigation depth improved plant height, leaf area index, aboveground dry matter and seed cotton yield, while increasing N rate increased and then declined these indicators. At the squaring and flowering stages, the N accumulation in all parts of cotton increased as irrigation depth and N rate increased, whereas it increased and then declined with increasing N rate at the boll-setting and harvesting stages. At the squaring and flowering stages, N was mainly accumulated in the leaves. As the growth period progressed, N was transported to bolls and the proportion of N content in leaves decreased. The proportion of N accumulation in cotton bolls was largest at the boll-setting and harvesting stages, and the N accumulation in plant organs followed the order of boll > leaf > stem > root. As irrigation depth increased, PFPN increased but WP decreased. As N rate increased, PFPN decreased but WP increased and then declined. The increases in N rate improved fiber quality. The maximum seed cotton yield (7578 kg ha−1 in 2020 and 7173 kg ha−1 in 2021) and greater WP, PFPN and fiber quality occurred in W3N300, which was recommended as a sustainable cotton production strategy in the Korla region of southern Xinjiang and elsewhere with similar environments to improve water-nitrogen utilization efficiency, seed cotton yield and alleviate soil nitrate pollution risk.