This paper details an application of the Water Poverty Index (WPI) to evaluate the state of water resources in an inland river basin using a case study of the Heihe River Basin (HRB) located in northwest China. The WPI includes five components (resources, access, capacity, use, and environment) and has 13 indicators; each indicator is assigned an equal weighting. The selected set of components and indicators was used to discuss the spatial and temporal variation of the water scarcity situation in the middle of the HRB for a 10-year assessment period. The results show that the water scarcity situation of the HRB is generally evolving in a positive way from 2001 to 2010. However, the WPI varied widely (from 24.6 to 66.5) at a spatial scale. The water situation was best maintained in Jiayuguan City, and it was most severe in Jiuquan City. These variations suggest that different cities require different policy intervention to improve the overall water situation. Overall, the WPI appears to be a reasonable approach to examine the water scarcity situation and help decision makers to better devise local policy.