Urumqi is located in the arid region of northwestern China, known for being one of the most delicate ecological environments and an area susceptible to climate change. The urbanization of Urumqi has progressed rapidly, yet there is a lack of research on the urbanization effect (UE) in Urumqi in terms of the regional climate. This study investigates the UE of Urumqi (urban built-up area) on the regional thermal environment and its mechanisms for the first time, based on the WRF (Weather Research and Forecasting) model (combined with the Urban Canopy Model, UCM) simulation data of 10 consecutive years (2012–2021). The results show that the UE on surface temperature (Ts) and air temperature at 2 m (T2m) is strong (weak) during the night (daytime) in all seasons, and the UE on these is largest (smallest) in spring (winter). In addition, the maximum UE on both Ts and T2m is present over southern Urumqi in winter, whereas the maximum UE is identified over the northern Urumqi in other seasons. The maximum UE on Ts occurred in northwestern Urumqi at 18 LST (Local Standard Time, i.e., UTC+6) in autumn (reaching 5.2 °C), and the maximum UE on T2m occurred in northern Urumqi at 4 LST in summer (reaching 2.6 °C). Urbanization showed a weak cooling effect during daytime in summer and winter, reflecting the unique characteristics of the UE in arid regions, which are different from those in humid regions. The maximum cooling of Ts occurred in northern Urumqi at 11 LST in summer (reaching −0.4 °C), while that of T2m occurred at 10 LST in northern and northwestern Urumqi in winter (reaching −0.25 °C), and the cooling effect lasted for a longer period of time in summer than in winter. The UE of Urumqi causes the increase of Ts mainly through the influence of net short-wave radiation and geothermal flux and causes the increase of T2m through the influence of sensible heat flux and net long-wave radiation. The UE on the land surface energy balance in Urumqi can be used to explain the seasonal variation and spatial differences of the UEs on the regional thermal environment and the underlying mechanism.