Balancing the relationship between rapid urbanization and water resources is crucial for the sustainable development of China. Water green utilisation efficiency (WGUE) is a significant indicator of the sustainability of water utilisation. The paper uses the super-efficiency SBM model with undesirable outputs to evaluate the WGUE in 30 provinces in China from 2010 to 2019, and it then uses the Tobit model to test the nonlinear effects of urbanization on WGUE empirically. The main conclusions are that (1) the WGUE in China is not evenly distributed: the eastern region is the most efficient, followed by the central region and the western region; the northeastern region is the lowest. Beijing and Shanghai were at the production frontier during the researched period. (2) There is an inverted U-shaped relationship between urbanization and WGUE. Urbanization is associated with water environmental degradation in an early stage. Nevertheless, after achieving a threshold level, it improves WGUE. (3) The increase in technical application level, trade openness and educational level can facilitate WGUE. (4) In the robustness tests, the regression results of coefficient direction and significance for the independent variables are consistent with the above results, therefore the empirical research had the good robustness. The research results also able to promote the sustainable use of water resource in China.