A comprehensive analysis of the SPOT VGT, NOAA/AVHRR, EOS/MODIS, TM and DEM data by using the Geographic Information System (GIS) showed that the ecological construction project for changing cultivated land back into forest or grass land in seven counties of northern Yanan has achieved some effects. Examination of the NOAA/AVHRR and EOS/MODIS remote sensing monitoring data from 1998 to 2009 revealed that the area is highlighted in the remote sensing images, distinct from the adjacent areas to the north and west. All the results demonstrated that the vegetation coverage is improved and the vegetation recovery is better in the hilly gully region of northern Yanan. Evolution of the SPOT VGT NDVI from 1999 to 2007 illustrated that the difference between the NDVI in northern Yanan and the NDVI in secondary forest is significantly reduced. The difference of NDVI in Northern Yanan and that in grain-growing areas is obviously increasing. The NDVI is in a rapid increasing stage with the linear trend value being 0.0078, visibly higher than that of the surrounding area. Comparative interpretation of the TM images before and after the farmland reconstruction illustrated that the effect of converting farmland into forest is remarkable in recent years, with great improvement in the ecological environment. Compared with the situation in 1997, 68.37% of arable land in northern Yanan is no longer farmed in 2007. The cultivated land is changed mainly into grassland, woodland, or orchard. The forest/grass coverage has markedly increased, with an attainment of 65.3%, raised by 24.3%. The grass area has increased pronouncedly in particular. By the year 2007, the area with vegetation coverage of 30%50% is the largest, occupying nearly half (47.2%) of the total area, and the area with tall vegetation has also dilatated a lot, from 6% in 1997 to 22% in 2007. TM images and DEM data analyses showed that the soil erosion intensity decreases in general. Areas of violent soil erosion, extremely heavy soil erosion, and heavy soil erosion have diminished notably, by more than 50%. However, the areas of violent soil erosion and extremely heavy soil erosion still account for 13.3% of the total eroded soil land of China in 2007, so the situation is still formidable. Vegetation coverage is dominated by shrub and grass. The area covered by trees takes only a small percentage, and the forest coverage is only 22.4%. Therefore, strengthened governance is still imperative.