The source region of the Yangtze River, as a crucial freshwater resource supply area in China and an essential component of the ecological security barrier on the Qinghai-Tibet Plateau, exerts significant influence on the ecological security and sustainable development of the Yangtze River Basin and even the entire nation through its water environment quality and the evolution process of the “nature-society” system within the watershed. This study examines the hydrological and environmental dynamics of the Yangtze River source region through a dual analysis of water flow evolution and water quality changes. First, based on hydrological and climatic data from 1956 to 2022 (67 years), we project future runoff trends at the basin outlet, revealing fluctuations of approximately ±15% driven by precipitation variability and rising temperatures. Second, by integrating water quality monitoring data (2012–2022), land use changes, and the "Production-Living-Ecology" (PLE) model, we assess long-term water environment quality and its interplay with human activities. Our findings indicate that the water quality in the region has consistently met Class II standards, affirming its suitability as a drinking water source and a conservation zone for rare aquatic species. Furthermore, comparative analysis of Golmud City and Yushu City demonstrates divergent PLE functional evolution, with Yushu exhibiting stronger synergy among the "triple functions" and greater potential for harmonizing ecological preservation with socioeconomic development. This research provides a scientific foundation for sustainable management strategies in the Yangtze River source region.