The Loess Plateau is an important agricultural area in China; its productivity is limited mainly by available water. To achieve sustainable development it is essential to improve crop water use efficiency (WUE). This study describes field experiments on winter wheat that were conducted in 1984–94 at Changwu Agro-ecological Station, which is representative of the highland areas on the Loess Plateau. The study collected data on water and energy balance components, crop growth and yield. A model based on biophysical measurements — WAVES — was used to predict water cycling and crop growth for one-year and 10-year periods. The predictions agreed well with the field measurements. The study showed that WUE on the plateau can be improved by increasing soil fertility (mainly through fertiliser application). The WAVES model provides a useful tool for improving regional WUE for crop production.