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In this paper, drought status of northwestern China is evaluated using the Terra-Moderate Resolution Imaging Spectroradiometer (MODIS) data with a newly developed method called perpendicular drought index (PDI), which is defined as a line segment that is parallel with the soil line and perpendicular to the normal line of soil line intersecting the coordinate origin in the two-dimensional scatter plot of red against near infrared (NIR) wavelength reflectance. To validate the PDI in macroscale applications, quantitative evaluation of drought conditions in Ningxia, Northwestern China is carried out by comparing the PDI with one of the well-known drought indexes, namely, temperature-vegetation index (TVX). Linear regression between ground-measured soil moisture data and the PDI and the TVX was made. Results show that satellite based PDI and TVX has significant correlation with 0-20cm averaged soil moisture obtained over the meteorological observing stations across the whole study area. The highest correlation of R-2=0.48 for the PDI and R-2=0.40 for the TVX is obtained when compared with average soil moisture from 0 to 20cm soil depth. According to the drought critical values defined by soil hydrologic parameters including soil moisture, wilting coefficient and field moisture capacity, the PDI based drought guidelines are established, and then the drought status in the study area is evaluated using the PDI. It is evident from the results showing the spatial distribution of drought in northwestern China that the PDI is highly accordant with field drought status.