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The vegetation response to climatic factors is a hot topic in global change research. However, research on vegetation in Shule River Basin, which is a typical arid region in northwest China, is still limited, especially at micro scale. On the basis of Moderate-resolution Imaging Spectroradiometer (MODIS) Normalized Difference Vegetation Index (NDVI) data and daily meteorological data, employing panel data models and other mathematical models, the aim of this paper is to reveal the interactive relationship between vegetation variation and climatic factors in Shule River Basin. Results show that there is a widespread greening trend in the whole basin during 2000-2015, and 80.28% of greening areas (areas with vegetation improvement) are distributed over upstream region, but the maximum vegetation variation appears in downstream area. The effects of climate change on NDVI lag about half to one month. The parameters estimated using panel data models indicate that precipitation and accumulated temperature have positive contribution to NDVI. With every 1-mm increase in rainfall, NDVI increases by around 0.223 parts per thousand in upstream area and 0.6 parts per thousand in downstream area. With every 1-degrees C increase in accumulated temperature, NDVI increases by around 0.241 parts per thousand in upstream area and 0.174 parts per thousand in downstream area. Responses of NDVI to climatic factors are more sensitive when these factors are limiting than when they are not limiting. NDVI variation has performance in two seasonal and inter-annual directions, and the range of seasonal change is far more than that of inter-annual change. The inverted U-shaped curve of the variable intercepts reflects the seasonal change. Our results might provide some scientific basis for the comprehensive basin management.