Branched glycerol dialkyl glycerol tetraethers (bGDGTs) have been show promising for continental paleotemperature studies in loess-paleosol sequences (LPSs). Thus far, however, little is known about the effect of soil moisture on their distributions on the Chinese Loess Plateau (CLP). In this study, the relationships between environmental variables and the cyclization of bGDGTs (the so called CBT index) were investigated in a comprehensive set of surface soils in the CLP and its adjacent arid/semi-arid areas. We find that CBT correlates best with soil water content (SWC) or mean annual precipitation (MAP) for the total sample set. Particularly for the CLP soils, there is a significant positive relationship between CBT and MAP (CBT = −0.0021 · MAP + 1.7, n = 37, R2 = 0.87; MAP range: 210–680 mm). This indicates that CBT is mainly controlled by soil moisture in the alkalescent soils (pH 〉 7) in arid/semi-arid regions, where it is not sensitive to soil pH. Therefore, we suggest that CBT can potentially be used as a palaeorainfall proxy on the CLP. According to the preliminary CBT–MAP relationship for modern CLP soils, palaeorainfall history was reconstructed from three LPSs (Yuanbao, Lantian, and Mangshan) with published bGDGT data spanning the past 70 ka. The CBT-derived MAP records of the three sites consistently show precession-driven variations resembling the speleothem δ18O monsoon record, and are also in general accord with the fluctuations of the respective magnetic susceptibility (MS) record, supporting CBT as a reasonable proxy for palaeorainfall reconstruction in LPS studies. Moreover, the comparison of CBT-derived MAP and bGDGT-derived temperature may enable us to further assess the relative timing and magnitude of hydrological and thermal changes on the CLP, independent of chronology.