-oil and hydrochar were produced through the hydrothermal liquefaction (HTL) of Salix psammophila (SP) branch residues with recycled processing water, in order to address the lack of water in deserts or sandy lands and the difficulty of water treatment in a batch reactor. The results indicated that the recycling of the HTL processing water could significantly improve the yield of bio-oil from 30.3% to 46.9%. The gas chromatography and mass spectrometry analyses of the obtained bio-oil confirmed the presence of value-added chemicals, such as phenolics, acetic acid, and furans. The acetic acid in the processing water played a key role in the HTL. The heavy oil had a high content (maximum of 42.7 wt%) of the low boiling point fraction (<300 °C), indicating its potential for further applications. The higher heating value of the hydrochar was about 27 MJ/kg, equivalent to the heating value of medium-rank and high-rank coals. These results show that HTL using recycled processing water has great potential for utilization of desert biomass wastes.