[Objective] This study aims to develop a comprehensive diagnostic method for evaluating the water balance status across water resources, ecosystems, and socio-economic systems in the context of large-scale water management projects. The focus is on the potential water source areas of the West Route of South-to-North Water Diversion Project, analyzing the interactions between natural water balances, socio-economic demands, and ecological considerations. [Methods] The research centered on quantifying and assessing the coordination and sustainability of these systems in the West Route’s water source region from 2005 to 2020. An analytical framework based on the principles of water balance was constructed, incorporating four key components: natural water supply and demand, socio-economic water needs, ecological water consumption, and the competition between ecological and socio-economic systems within the river basin. This framework was used to quantify the water balance status by evaluating water availability, ecological functioning, and socio-economic demands over the study period. Statistical methods and multidimensional analysis were applied to calculate the coupling coordination degree, which measures the extent of coordination between water resource management, ecological protection, and socio-economic development. The study relied on regional hydrological records, socio-economic data, and ecological assessments to ensure robust and reliable results. [Results] From 2005 to 2020, the water balance of the West Route’s water source areas remained relatively stable. Importantly, the region maintained a steady equilibrium in water resources, with significant improvements in the coordination between water resources, socio-economic development, and ecological systems. The coupling coordination degree among these three systems showed a clear upward trend, reflecting the growing harmony between water management, ecological conservation, and socio-economic growth. The research highlighted that the ecological system within the water source areas effectively adapted to changes in water availability, demonstrating resilience in sustaining water use. Moreover, there was a substantial positive synergy between water resource management and ecological protection, which contributed to the stability and improvement of the regional water balance. Additionally, the study showed that the competition between ecological and socio-economic water demands became more balanced, shifting toward a more integrated approach. The region’s ecological protection strategies became better aligned with water resource management policies, resulting in improved sustainability in both ecological and economic terms. [Conclusion] The findings suggest that enhanced water use efficiency, combined with adaptive ecological protection measures, has played a pivotal role in achieving these positive trends. The study’s innovative approach—integrating natural water balance, socio-economic factors, and ecological needs—provides a comprehensive framework for evaluating the sustainability of water resources in large-scale inter-basin water diversion projects. The findings demonstrate that coupling water resource management with ecological protection is not only feasible but essential for ensuring the long-term sustainability of water source areas. In conclusion, this study underscores the importance of adopting an integrated approach to water resource management, one that recognizes the interdependencies between natural, economic, and ecological systems. The research highlights that coordinated water management, paired with adaptive ecological conservation strategies, is critical to achieving sustainable development and ensuring the resilience of water source areas in large-scale water transfer projects. Furthermore, the study suggests that such integrated management models can serve as a blueprint for other regions facing similar water resource and environmental challenges, ultimately supporting the global pursuit of water sustainability.