Water deficiency, together with soil salinization, has been seriously restricting sustainable agriculture around the globe for a long time. Optimal soil moisture regulation contributes to the amelioration of soil water and salinity for crops, which is favorable for plant production. A field experiment with five soil water lower limit levels (T1: 85% FC, T2: 75% FC, T3: 65% FC, T4: 55% FC, and T5: 45% FC, where FC is the field capacity) was conducted in southern Xinjiang in 2018 to investigate the responses of soil water–salt dynamics and cotton performance to soil moisture regulation strategies. The results indicated that in the horizontal direction, the farther away the drip irrigation belt, the lower the soil moisture content and the greater the soil salinity. In the vertical direction, the soil moisture and soil salinity increased first and then decreased with an increase in soil depth after irrigation, and the distribution was similar to an ellipse. Moreover, the humid perimeter of soil water and the leaching range of soil salt increased with a decrease in the soil moisture lower limit. Though more soil salt was leached out for the T5 treatment at the flowering stage due to the higher single irrigation amount, soil salinity increased again at the boll setting stage owing to the long irrigation interval. After the cotton was harvested, soil salt accumulated in the 0–100 cm layer and the accumulation amount followed T3 > T5 > T1 > T2 > T4. Moreover, with a decline of soil moisture lower limit, both plant height and nitrogen uptake decreased significantly while the shoot–root ratio increased. Compared with the yield (7233.2 kg·hm−2) and water use efficiency (WUE, 1.27 kg·m−3) of the T1 treatment, the yield for the T2 treatment only decreased by 1.21%, while the WUE increased by 10.24%. Synthetically, considering the cotton yield, water–nitrogen use efficiency, and soil salt accumulation, the soil moisture lower limit of 75% FC is recommended for cotton cultivation in southern Xinjiang, China.