Despite prevailing dry conditions, groundwater-fed lakes are found among the earth's tallest sand dunes in the Badain Jaran Desert, China. Indirect evidence suggests that some lakes are shrinking. However, relatively few studies have been carried out to assess the regional groundwater conditions and the fate of the lakes due to the remoteness and severity of the desert environment. Here we use satellite information to demonstrate an ongoing slow decrease in both lake level and groundwater storage. Specifically, we use Ice, Cloud, and land Elevation Satellite altimetry data to quantify water levels of the lakes and show overall decreases from 2003 to 2009. We also use water storage changes from the Gravity Recovery and Climate Experiment and simulated soil and water changes from the Global Land Data Assimilation System to demonstrate long-term groundwater depletion in the desert. Rainfall increase driven by climate change has increased soil water and groundwater storage to a certain degree but not enough to compensate for the long-term decline. If countermeasures are not taken to control the pumping, many lakes will continue to shrink, causing an ecological and environmental disaster in the fragile desert oases.