Groundwater levels (GWLs) are closely linked to environmental engineering geological issues in urban areas. With urban pumping control and the increase in groundwater recharge associated with global warming, rising GWLs can lead to hazards, such as seepage and sand liquefaction, which threaten the foundation of engineering infrastructure and adversely affect the lives of urban residents. However, urban engineering geological issues caused by rising groundwater are yet to be comprehensively quantified. In this study, we investigated spatial groundwater variation and the extent of seepage, sand liquefaction, and loess hydro-compaction using empirical equations, statistical analysis, and a numerical groundwater model for the most populous city in northwest China, Xi'an. Our results show that the overall GWL declined significantly before 2002 and gradually increased from 2003. The spatial trend in the GWL was determined to be highly heterogeneous. The maximum potential areas of seepage, sand liquefaction, and loess hydro-compaction accounted for 38%, 8%, and 11% of the total area, respectively. The effects of increasing areal recharge were smaller than the effects of decreasing the pumping rate for the expanding area of sand liquefaction and loess hydro-compaction, based on model projections. Our study provides an evaluation framework and useful insights into the protection of urban groundwater systems.