Improving water use efficiency from a recycling perspective is claimed to be a better way to ensure prosperity in a water-stressed world. Although many studies have focused on the efficiency of integrated water use system, such as a water use and wastewater treatment (WUWT) system, few studies have observed the dynamic change involving a two-stage recycling structure. This research thus proposes a dynamic two-stage recycling model within the directional distance function (DDF) by taking reused water in the WT stage as a recycled product for WU stage's input in the next period. This paper reveals the dynamic evolution and spatial migration path of this efficiency in China. Results are as follows. (1) The average overall efficiency of the urban WUWT system for 30 provinces during 2011–2018 was 0.78. The central region's lower WUWT efficiency was caused by the expanding provincial differences in WU efficiency. (2) The urban WU sub-system performed poorer than that of the urban WT sub-system due to underutilizing reused water, such as in Jiangxi, Guangxi, Yunnan, and Jilin. (3) Narrowing the spatial imbalance of economic development and water use between the eastern and western regions is of great importance for promoting China's spatial imbalance of urban WUWT efficiency.