Rapid and accurate estimation of canopy water content (CWC) is important for agricultural water management and food security. Due to the complexity of dynamic changes in water transport during plant growth, estimation of CWC using a single sensor often leads to high uncertainty in the results. Multi-sensor data fusion is one of the solutions to this problem, but suitable spectral preprocessing methods and data fusion methods still need further research. The objectives of this study were to characterize the performance of two varieties at different growth stages under five water stress conditions and screen hyperspectral sensitive spectral bands by using continuous wavelet transform (CWT) and a successive projection algorithm (SPA). Ultimately, the CWC prediction model of winter wheat hyperspectral characteristic bands and thermal imaging information fusion was created using the GRA algorithm. The results showed that canopy temperature parameters and spectral parameters responded significantly to water deficits in winter wheat. Using the CWT-SPA method, a total of 285 hyperspectral feature bands with wavelet decomposition scales ranging from one to eight were selected. The sensitive bands were mainly distributed in the following ranges: 545–561, 746–1348, 1561–1810, and 2122–2430 nm. The GRA algorithm has good multi-source data model fusion capability, and its constructed prediction model based on hyperspectral and thermal image fusion has high accuracy on the canopy water content in winter wheat (R2 = 0.930, RMSE = 5.44%, nRMSE = 7.94%). Compared to the single-feature spectral model (R2 = 0.864, RMSE = 5.92%, nRMSE = 8.63%) and thermal image CWC prediction model (R2 = 0.813, RMSE = 7.22%, nRMSE = 10.49%), the model prediction accuracy based on the GRA algorithm is increased by 7.64% and 13.69%, respectively.