Based on data collected over 2 years of monitoring the lower reaches of the Tarim River, the groundwater table depth was divided into six classes; 0 to 2 m, 2 to 4 m, 4 to 6 m, 6 to 8 m, 8 to 10 m, >10 m. We investigated the vegetation in this area to measure the influence of groundwater table depth on plant diversity and species ecological niche. The results indicated that plant diversity was highest at the 2 to 4 m groundwater table depth, followed by that at 4 to 6 m, and then that at 0 to 2 m. When the groundwater depth dropped to below 6 m, species diversity decreased dramatically, and the slope of Hill's index tended to level off. The ecological niche of the major species in this area initially expanded as the groundwater level dropped. The widest niche appeared at the 4 to 6 m groundwater table depth and gradually narrowed with deepening groundwater. Ecological niche analysis also revealed that the 4 to 6 m groundwater table depth was associated with the lowest degree of niche overlap and the richest variety of species. Our findings indicate that in the lower reaches of the Tarim River, the groundwater table depth must be a minimum of 6 m for vegetation restoration; it should be maintained at 2 to 4 m in the vicinity of the water path, and at 4 to 6 m for the rest of this arid area.