With environmental changes, sustaining watershed ecosystem services requires understanding community perceptions and preferences. Integrated approaches considering community perceptions, climate change, and land use cover change are crucial. We address a study gap by combining climate change and land use cover change data with an analysis of community perceptions to evaluate the watershed ecosystem services situation in Nepal’s Khageri Khola Watershed. Data from in-depth stakeholder interviews (n = 16), household perception surveys (n = 440), and participant observations (n = 5) were supplemented by meteorological and land use cover change data. Descriptive analysis, index value calculation, Spearman’s Rho correlation, and chi-square statistics were used to understand linkages between socio-demographics, climate change perceptions, watershed ecosystem services importance, and changes in watershed ecosystem services supply. The Mann–Kendall test, Sen’s slope calculation, and land use cover change analysis considered temperature, precipitation, and land use. Among watershed ecosystem services, communities prioritized drinking water as the most important and biodiversity support as the least important. Watershed ecosystem services exhibited decreasing trends, with soil fertility and productivity notably high (89%) and natural hazard control low (41%). Significant alignment existed between community perceptions and local climate indicators, unlike the incongruity found with land use cover changes, especially regarding water bodies. Socio-demographic factors influenced community perceptions. Policy recommendations include analyzing watershed-level community demand and preferences, integrating community perceptions with climate change and land use cover change data in decision making, engaging communities, equitable sharing of the benefits generated by watershed ecosystem services, and considering socio-demographic and topographic diversity in tailoring management strategies.