Taking the Hexi Corridor in western China as an example, this paper studies the interactive intimate i relation between urbanization and the environment in arid areas based on the grey system theory. The results show that the grey relational degree between urbanization and the environment is low in the agriculture-oriented cities, modest in the tourism-oriented cities and great in the industry-oriented cities. The changing trend of coupling degree between urbanization and the environment does not entirely agree with that of urbanization or the environment. It showed fluctuating trends, which reflects the compactness and properties of the different stages of the coupling states between urbanization and the environment. In order to achieve a harmonious development with the environment in arid areas, traditional development ideas about urbanization should be revised and more attention should be paid to the effect of restriction of water resources and the ecological environment on the development of the economy and society.