Using a seven-year history of the satellite measurements and meteorology data over Georgia, USA, this study investigated the capability of a series of satellite-derived vegetation water indices for drought monitoring, as well as the connection between fire occurrence and drought conditions. The vegetation water indices are normalized calculations between MODIS near infrared band 2 and shortwave infrared bands 5, 6, 7, and the difference between bands 6 and 7, denoted by NDWI2,5, NDWI2,6, NDWI2,7 and NMDI, respectively. Results show that the drought conditions indicated by NMDI, NDWI2,6 and NDWI2,7 agree well with what have been identified by meteorology data. NMDI, however, has demonstrated more dependable results regarding seasonal moisture variations, as well as stronger responses to drought conditions than NDWI2,6, and NDWI2,7. The annual fire number exhibits high correspondence to drought conditions. Drought intensity also influenced fire extent and the most widespread fires occurred during the driest years. Analysis reveals that NMDI can be used as an effective indicator for fire risk monitoring. It is expected that this research will greatly benefit many applications, such as monitoring drought and detecting fire danger potential.