Water conservation (WC) is a key ecosystem service offered by dryland mountains given its effect in flood prevention and drought relief. However, the consequence of climate change on WC services is largely unknown, particularly in mountain areas with limited data availability. By using a parametric model driven by ground and satellite remote sensing data, the spatial distribution of WC and its inter-annual trends and variability were assessed in the Qilian Mountains to differentiate the main factors for WC dynamics. Our results showed that the spatiotemporal variation of modeled WC and remotely sensed soil moisture was consistent. Mean annual WC showed a contrary trend with increasing annual mean air temperature and precipitation and was higher in forests than grasslands and deserts. In the context of warm and humid climates, percentage of the area with a significant increase and decrease in annual WC from 2000 to 2019 was 32.2% and 4.2% ( p < 0.05), respectively. WC declines appeared mainly in a forest steppe zone at an altitude of 2600–3300 m, as increased vegetation growth boosted water consumption and eventually led to soil drying. Increases in WC were largely attributed to increasing precipitation and decreasing solar radiation, making a contribution of 39.4 and 38.4%, respectively. WC was positively correlated with precipitation but negatively related to land surface temperature ( p < 0.05). A negative relationship between WC and solar radiation was prevalent in deserts. Precipitation and vegetation growth explained 50.1% and 22.8%, respectively, of the inter-annual variability in WC. The findings of this study highlight the importance of evapotranspiration in controlling WC dynamics in the forest steppe zone of a dryland mountain, where a risk from reduced water conservation may increase under future climate warming. To conserve grassland and desert ecosystems is more beneficial to improve the WC function of the Qilian Mountains as compared to afforestation . • Water conservation is higher at mid-elevation than at upper and lower elevations. • A contrasting trend in water conservation appears in a warm and humid climate. • Increased transpiration causes a reduction of water conservation, mainly in the forest steppe zone. • There is mounting concern about the potential risk of diminished water conservation under future climate warming. • Increasing vegetation cover by management and restoration measures in sparse vegetation areas helps to promote water conservation.