Based on the engineering background that rock masses of underground reservoirs in mines are frequently disturbed by cyclic loads such as mine earthquake and mining stress, uniaxial compression and cyclic loading tests for sandstones with different water contents were carried out in laboratory. The crack propagation and failure laws of sandstones with different water contents were revealed by digital speckle technique. Based on scanning electron microscopic (SEM) analysis, the micro deterioration mechanism of sandstones with different water contents under cyclic loading was obtained. The test results show that the peak strength of sandstone decreases gradually with the increase of water content under both uniaxial compression and cyclic loading conditions. The peak axial strain variation of dry sandstone experiences four stages of initial deformation, constant velocity deformation, accelerated deformation, and instability failure, and that of the water-bearing sandstone experiences three stages of initial deformation, constant velocity deformation, and instability failure. With the increase of water content, the peak axial strain in the corresponding stage gradually decreases. It is verified by the deformation rate analysis method that water has no effect on the deformation memory characteristics of sandstone. Under uniaxial cyclic loading condition, the failure mode of sandstone gradually transits from tension−splitting failure at dryness to tension−shear mixed failure, and presents a single shear failure at saturation. SEM results show that with the increase of water content, the fracture structure plane gradually transits from smooth structure, round structure, and sheet structure to completely broken structure. With the increase of water content, the absolute damage parameter increases, which reflects the positive correlation of water−rock coupling damage, and the cumulative damage parameter larger at the same cycle accumulates faster.