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The sandstone reservoirs in the Upper Paleozoic He 8 Member in the northern Tianhuan depression of the Ordos Basin are vastly different and feature particularly complex gas–water distributions. Scanning electron microscopy, fluorescence, Raman spectroscopy inclusions, relative permeability analysis, and nuclear magnetic resonance were utilized in this study based on core data, identification statistics, and various thin-section microscope measurements. Samples from the Upper Paleozoic He 8 Member in the northern Tianhuan depression were collected to study the characteristics of reservoir heterogeneity and gas–water distribution, which were controlled by differential diagenesis. The results indicate that compaction and dissolution are the two most important factors controlling reservoir heterogeneity. Large differences in diagenesis–accumulation sequences and pore structure characteristics affect reservoir wettability, irreducible water saturation, and gas displacement efficiency, thereby controlling the gas–water distribution. The He 8 Member is a gas reservoir that is densified because of accumulation. Reservoirs can be divided into three types based on the relationship between diagenetic facies and gas–water distribution. Type I is characterized by weak compaction, precipitate or altered kaolinite cementation, strong dissolution of diagenetic facies, and high porosity and permeability. This type is dominated by grain-mold pores and intergranular dissolution pores and produces gas reservoirs with high gas yield. Type II is characterized by medium-strength compaction, altered kaolinite or chlorite cementation, weak dissolution of diagenetic facies, and medium porosity and permeability. This type is dominated by residual intergranular pores, a few residual intergranular pores, and dispersed dissolution pores, producing gas reservoirs with low gas yield. Type III is characterized by medium-strength compaction, altered kaolinite cementation, and medium-strength dissolution of diagenetic facies. This type is dominated by kaolinite intercrystal pores and dispersed dissolution pores, producing gas reservoirs with high water yield.