Abstract: The Hexi Corridor is experiencing a coupled water-resource crisis characterized by physical water scarcity, groundwater overexploitation, and ecological degradation. However, the cascading interactions among these processes and the quantitative effectiveness of interbasin water transfer in restoring the regional water resources system remain poorly understood. This study aims to diagnose this chain of degradation at the basin scale, elucidate the restoration mechanisms driven by interbasin water transfer, and develop a quantitative framework for coordinated water allocation.Based on multi-source data (such as surface runoff, groundwater dynamics, remote sensing) from 2000 to 2023, two scenarios of "baseline" and "water transfer" (annual transfer of 40×10⁸ m³) were established using the water balance method. Coordinated allocation analysis was conducted following the priority order of "ecology–industry–agriculture."The current water supply demand gap reaches 17.03×10⁸ m³, with a surface water development and utilization rate as high as 95%. Groundwater storage is decreasing by an average of 9.40×10⁸ m³ per year, spring discharge has declined by 58.88%, and natural wetlands are shrinking. Existing management measures are constrained by the total water resources limitation, falling into a systemic constraint. Under the interbasin water transfer scenario, the imported water can fully cover the ecological deficit (6.40×10⁸ m³) and industrial deficit (1.26×10⁸ m³), with the remaining 32.34×10⁸ m³ available for agriculture, potentially increasing irrigated area by approximately 4.13×10⁵ ha, thereby achieving a regional balance in water supply and demand. The water resources system of the Hexi Corridor has formed a chain degradation pathway from physical water scarcity to groundwater overexploitation and ultimately ecological degradation, with the potential for further local water-resource development approaching its practical limit. Interbasin water transfer is a strategic necessity to break this vicious cycle and reconstruct regional water balance. The allocation priority order of "ecology–industry–agriculture" is scientifically feasible and can provide quantitative support for decision-making on water transfer projects and coordinated water resources management.