Soil erosion resulted from human activities and associated land-use and climate change threaten our societal and economic thriving. Major policies and actions have been putting in place to protect soil from and mitigate soil erosion, such as in Europe and Asia. The main objective of our work is to synthesise the impacts of China’s policy response to control soil erosion – the implementation of the Grain for Green Program – on water resources in a large erosion-prone dryland area. A combination of bottom-up (process-based knowledge) and top-down (watershed input-output relationship) approaches is applied to review the on-site and off-site hydrological impacts. The results highlight the critical linkages to water and climate co-benefits in China’s soil conservation programme. It is indicated that the lack of water-saving strategy in measures of soil erosion control, such as the exclusion of plantation forest management, is the primary cause of the intensified water crisis in dryland China. A holistic understanding of the interconnected characters of soil-water-climate is vital for developing cross-cutting policy responses to address soil erosion. Our work provides lessons-learned to the global long-term greening efforts in the degraded arid environment. We strongly recommend careful hydrological evaluation for drylands if tree-planting is used for soil conservation with wishful climate and water co-benefits.