Land use and ecosystem services need to be assessed simultaneously to better understand the relevant factors in sustainable land management. This paper analyzed land use changes in the middle reach of the arid Heihe River Basin in northwest China over the last two decades and their impacts on water resources and soil organic carbon (SOC) storage. The results indicated that from 1986 to 2007: (1) cropland and human settlements expanded by 45.0 and 17.6 %, respectively, at the expense of 70.1, 35.7, and 4.1 % shrinkage on woodland, grassland, and semi-shrubby desert; (2) irrigation water use was dominant and increased (with fluctuations) at an average rate of 8.2 %, while basic human water consumption increased monotonically over a longer period from 1981 to 2011 at a rate of 58 %; and (3) cropland expansion or continuous cultivation led to a significant reduction of SOC, while the land use transition from grassland to semishrubby desert and the progressive succession of natural ecosystems such as semi-shrubby desert and grassland, in contrast, can bring about significant carbon sequestration benefits. The increased water consumption and decreased SOC pool associated with some observed land use changes may induce and aggravate potential ecological risks for both local and downstream ecosystems, including water resource shortages, soil quality declines, and degeneration of natural vegetation. Therefore, it is necessary to balance socioeconomic wellbeing and ecosystem services in land use planning and management for the sustainability of socio-ecological systems across spatiotemporal scales, especially in resource-poor arid environments.