The loess in the arid area of Xinjiang is located at the eastern end of the Central Asia Loess Belt, and paleoclimate research about it is of great importance for understanding the mechanism of interaction of the Eurasian Westerly monsoon system and the aridity of Central Asia. This review focuses on recent progress concerning the spatial distribution, material composition and provenance of loess in Xinjiang and points out the shortcomings of and challenges to provenance and dust circulation. Field investigation and previous studies indicate that loess sediments have been mainly distributed on the river terraces and windward piedmont of the Tianshan Mountains and the Kunlun Mountains since the late Pliocene (mainly late Pleistocene). Grain size and age data show that Xinjiang loess deposits at some locations are rapid and discontinuous or sedimentary hiatus. The Siberian High system largely controlled dust mobilization and loess accumulation in northern Xinjiang but not southern Xinjiang. In southern Central Asia, the intensity of dust activity may be determined by the Caspian Sea–Hindu Kush Index (CasHKI) and local circulation. However, there is not enough evidence that the CasHKI index can affect the Tarim Basin area. Consequently, ascertaining the driving mechanism of mid-latitude Westerly winds and the dynamic process of loess deposition in Xinjiang is a specific suggestion for critical future research. Many indicators have shown that the loess dust sources in Xinjiang are composed of mainly proximal materials plus some remote materials. Alluvial plains and local proluvial fans contributed more to loess deposition, while Central Asian deserts comprise a small proportion of loess deposition in northern Xinjiang. In future provenance research, new technologies and new methods should be continuously tested to facilitate an objective understanding of the provenance of the loess in Xinjiang.