Water, land, and other environmental conditions restrict marginal land (ML) conversion into newly cultivated land. Accurately evaluating ML’s development and utilization potential (DUP) can provide critical support for increasing new cultivated land and ensuring food security. This study focuses on Northwest China, using spatial identification of different types of ML based on remote sensing images, and constructs a county-level DUP evaluation model through contiguous characteristics and restrictive factors to determine new cultivated-land potential, water demand, and liftable grain production. The results show that the DUP of ML in Northwest China is 12.59 million ha, with low-efficiency cultivated land (LCL) and two types of restoration land (TTRL) accounting for 3.29% and 5.95%, and other marginal land (OML) making up 90.76%. The total water demand for ML development and utilization is 69.87 billion cubic meters, which can increase grain production by 62.31 million tons. The coordinated development of water, land, and food promotes an increase in grain production, with water resources being the main restrictive factor. This model effectively evaluates DUP and provides a scientific basis for promoting the rational use of water and land resources. Further research should set up more detailed water resource utilization strategies and scenarios as well as find more development and utilization techniques.