In order to increase the capability to understand and quantify the spatial differences in terrestrial water storage (TWS), and to reflect the unique energy balance processes and soil freeze–thaw mechanisms in the Qinghai‐Tibet Plateau (QTP), this study improved the energy balance processes of the water and energy transfer processes model, including its surface radiation calculations and snowmelt module. By integrating these improvements, a water and energy transfer processes model in Qinghai‐Tibet Plateau (WEP‐QTP) for the Yellow River source region (YRSR) is developed. Using the improved WEP‐QTP model to perform simulations, we assessed the daily changes in snow cover, soil moisture (SM), permafrost (PM), and groundwater storage (GWS) in the YRSR. Our analysis revealed an increase in TWS of 0.24 mm/yr from 1961 to 2020. Snow water equivalent (SWE), SM, PM, and GWS have proportional contributions of 8.33%, 216.67%, −154.17%, and 29.17% to the increased TWS, respectively. SM is the primary component of TWS. Temperature (T), precipitation (P), evapotranspiration (E), and solar radiation (Rs) influence the spatiotemporal variations in TWS, as well as those of its components. The increase in P is the primary cause for the rise in TWS, SWE, and SM, while the increase in T predominantly contributes to the decrease in PM. Furthermore, permafrost degradation and climate‐induced warming and humidification lead to increased infiltration, resulting in elevated GWS.