The impact of high-intensity coal mining on water resources has drastically affected the local environment in the Yushenfu mining area, Northwest China. Many studies have ascertained that coal mining has caused reduction of the phreatic water level and vegetation death, which has deteriorated the fragile arid and semiarid ecosystems. However, at Jinjitan coal mine, it has been observed that the phreatic water level rose due to coal mining, which has been beneficial for the local ecology, especially the vegetation. In this study, the variation of the phreatic water table and its ecological effects were investigated by in-situ tests and remote sensing. The results suggest that the recovery of the permeability of the loess aquitard controls the vertical leakage of phreatic water, whereas horizontal recharge is controlled by land subsidence. An ecological impact evaluation, using the normalized difference vegetation index (NDVI), demonstrates that the vegetation is being gradually improved. Compared to a small improvement of ~9.7% in the unexploited area, a ~23.3% improvement occurred in the exploited area where low-density shrubs transformed to high-density shrubs and herbs. Emergence of phreatic water at the land surface in low-lying areas of the working faces may induce the formation of an oasis and wetland system in arid and semiarid areas. These findings could change the conventional negative impression around mining and improve ecological restoration practices.