Study region: The Qilian Mountain, northwestern China. Study focus: Land degradation is a global eco-environmental issue. To minimize soil erosion and land degradation, China has implemented several ecological engineering such as “Grain for Green” program (GFG) since 1999. Relationship between vegetation and water budgets in catchments has been widely studied, however very few studies addressed the effects of eco-environmental restoration on water balance in mountain areas, especially with a focus on soil moisture content. Therefore SWAT model was used to quantify the effects of ecological engineering actions (taken place in 2005) on water balance in Qilian Mountain. New hydrological insights for the region: After the ecological engineering, water yield and soil water content experienced an increment of 32%, and 46%. The opposite trend was monitored in runoff and evapotranspiration, which decreased by 48% and 4%, respectively. Therefore ecosystem restoration have increased soil water retention capacity, a greater proportion of precipitation reaching the catchment is absorbed by the soil rather than flowing out of the region as runoff. Therefore trade-offs between environmental sustainability and water resources security should be carefully addressed in arid region that experienced severe water shortages. Keyword: SWAT, Water balance, Ecosystem restoration, Qilian Mountain