Land use/Land cover (LULC) changes as a result of policy planning influence ecosystem structures, processes, and functions, which are the basis for providing a wide range of ecosystem services (ES). There is an increasing consensus about the importance of integrating ES into ecological policy but quantifying the potential impacts of different policy on ES has proven difficult. We designed a remote sensing, geographic information system and scenario analysis-based approach to estimate and analyze the relationship between ES (soil conservation and carbon sequestration) and ecological policy designed to improve human welfare in the Chongqing municipality in the upper reaches of the Three Gorges Reservoir Area, China; a densely populated, highly modified watershed with serious soil erosion and flood hazard. Three alternative scenarios in 2050 were modeled for the Three Gorges Reservoir Area watershed. The model GEOMOD was used to predict future LULC changes due to policy planning. The ES models (Universal Soil Loss Equation model and Carnegie-Ames-Stanford Approach model) were designed to inform decisions, with an aim to align economic forces with conservation. We examine policy effectiveness by comparing scenarios for 2050 (Scenario1: Maintain current policy with no considerations of ES; Scenario2: Integrate ES into policy planning; Scenario3: Integrate ES into policy planning in view of the need of local people). Scenario-based LULC change analysis revealed that if the current afforestation policy continues (scenario 1), total ES would be further increased in 2050 due to expansion of forest cover. However, by targeting policy to improve ES provision (scenarios 2 and 3), ecological risks of soil loss can be significantly reduced and carbon sequestration enhanced. Scenario 3, thus, provided the best future environmental development scenario considering the need of local people in each region for ES. This scenario will theoretically help the Three Gorges Dam to harvest more ecological benefits through improvements in soil conservation and carbon sequestration. This study highlights the observation that including ES in policy planning and has a great potential to generate opportunities to maximize ES. This study highlights that including ES in policy planning has a great potential to generate opportunities to maximize ES. Hence, there is a need to encourage proper implementation of ecological policy to maintain and improve ES.