Studying variations in land use and habitat quality in Yan'an City under the background of the gully control and land consolidation project (GCLC) has significant implications for ecological protection and quality development of the Loess Plateau. Therefore, this study quantitatively analyzed the temporal and spatial variations of land use and habitat quality in Yan'an City from 2010 to 2018 using the ArcGIS and InVEST models. The relationship between the status of implementation of the GCLC project in various districts in Yan'an City and regional habitat quality was also analyzed. The results showed that:(1) The land use types in Yan'an City mainly consisted of grassland, forest land, and cultivated land. From 2010 to 2018, the land use types remained relatively stable with limited interchangeable transformation among cultivated land, forest land, and grassland. (2) The habitat quality of Yan'an City was at the medium level, and the area of higher habitat quality levels accounted for more than 50% of the total area. The distribution pattern of habitat quality was higher in the southeast and southwest, and lower in the north. During the study period, the habitat quality index of Yan'an City decreased by 1.4%, and this trend was the most evident in central Baota District due to urbanization. (3) The habitat quality of Yan'an City had a certain degree of spatial aggregation. The "H-H" cluster is mainly located in the southwest forest region, while the "L-L" cluster is mainly located in Wuqi County in the northwest and Yanchang and Yichuan counties in the east. From 2010 to 2018, the spatial agglomeration of habitat quality tended to be scattered, and a large point degradation was observed in the central part. (4) The GCLC project had negative impact on the habitat quality of Yan'an City to a certain degree. Yan'an City maintained a relatively stable habitat quality and fulfilled the red line for cultivated land and food security concomitantly through ecological protection modes adapted to local conditions, resulting in a balance between quality development and ecological protection.