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• Hillslope topography is essential for local hydrology and peatland formation. • Microtopographic patterning enhances the positive water balance of the peatland. • Feedback between plant growth and pool development reinforces the stability of the peatland. Some sloping peatlands in northern regions often develop surface microtopographic patterns to maintain their water balance and ecosystem functioning. However, we do not know whether and how spatial patterning would influence the water balance and peat formation of permafrost-affected peatlands in relatively dry regions. Here we used data from the field observations and Unmanned Aerial Vehicle (UAV) survey of a slope peatland at an elevation of around 4800 m in the hinterland of the Qinghai-Tibetan Plateau (QTP) to document and understand the topographic controls of water balance and vegetation growth. Our terrain analysis result shows that the peatland—located on the middle section of a hillslope—has a gentle slope of 5.6° ± 2.5°, while the non-peatland upper section has a steep slope of 12° ± 4.5°. The great upstream catchment area and the presence of shallow impermeable permafrost likely create a saturated condition for peat formation. Our UAV results show obvious spatial patterning of abundant pools and ridges across this peatland, and pool sizes and ridge abundance increase with increasing slopes, suggesting that slope-controlled water flow gradient is the main driver of ridge formation and that ridges is to slow down the runoff. UAV-derived greenness values show a positive relationship with the total pool extent locally (R2 = 0.60) and decrease with increasing distance from the individual pools, suggesting sensitive responses of vegetation growth to surface moisture. Thus, enhanced vegetation growth and likely resultant great peat accumulation immediately around pools potentially further differentiate surface microtopography, strengthening the pool stability. We conclude that the local slope gradient, surface patterning (pools and ridges) and permafrost interact together to regulate water flow and maintain water balance, which in turn regulate the vegetation growth, peat accumulation and peatland stability. Our study implies that the delicate water balance maintained partly by microtopography is sensitive to climate change—especially potential extreme hydroclimate events—and natural and human-induced disturbances that may modify the surface patterning and weaken the peatland's stability, affecting the carbon sequestration ability of this type of peatlands. [ABSTRACT FROM AUTHOR]