To promote the high-quality development of the Yellow River Basin, the total amount and intensity of agricultural water must be controlled. Further speaking, an urbanization development system should be established that is compatible with water resources and the water environment. We adopted the stochastic frontier analysis model to measure the agricultural water utilization efficiency of the Yellow River Basin from 2007 to 2017. We also adopted the dynamic panel difference generalized method of moments (GMM) and system GMM models to verify the driving factors, in which population urbanization, economic urbanization, and equilibrium urbanization levels were selected as the key variables. The results show that the overall efficiency of agricultural water utilization maintained a steady upward trend during the research period. The spatial differentiation was generally characterized by higher efficiency levels in the eastern region and lower levels in the western region. The variation coefficient of water utilization efficiency showed a downward trend in general, which indicates a space spillover effect. Agricultural water utilization efficiency continued to converge from 2007 to 2017, and the upper reaches area converged relatively more quickly. Regarding the influencing factors, the population urbanization, economic urbanization, balanced urbanization, crop planting ratio, and rice planting ratio had negative effects on agricultural water utilization efficiency. Urbanization did not positively affect agricultural water use efficiency as the related theories, so urbanization quality and urban–rural integration should be paid more attention. However, technology innovation was significantly positive in agricultural water utilization efficiency. The influencing factors of per capita water availability and annual precipitation did not pass the significance test. Therefore, the government should vigorously promote the development of high-quality new-type urbanization, scientifically formulate the scale and speed of urbanization, strengthen the urban, rural, and industrial integration, and promote the adjustment of planting structures and agricultural deep processing.