Mountain forests within arid zones function as critical regional "water towers" and biodiversity hotspots, providing essential ecosystem services (ESs) such as carbon sequestration, water retention, soil conservation, and habitat maintenance. Despite their ecological significance, the spatiotemporal characteristics of these services remain insufficiently characterized. For this study, focusing on the Altai Mountains in northwestern China, we employed the InVEST model using climate, land cover, and soil survey datasets (2000-2020) to quantify ES dynamics, then applied Spearman rank correlation to analyze their spatial interactions. Results indicated the following distinct spatiotemporal patterns: (1) Temporally, water retention capacity increased by 23.5% from 2000 to 2020, with the most rapid growth occurring between 2000 and 2010, whereas carbon storage experienced a slight decline of 1.9%. (2) Spatially, water retention followed a "high-North, low-South" distribution, while carbon storage and habitat quality were highly concentrated in the central mid-elevation zones (1400-2400 m). (3) Trade-off intensification: a significant negative correlation between water retention and carbon storage deepened over the study period, highlighting an escalating "water-carbon" conflict. The aforementioned findings suggest that future management should be focused on avoiding high-density afforestation in mid-elevation water-sensitive zones to prevent excessive evapotranspiration. Instead, spatially differentiated strategies-prioritizing water yield protection in high-altitude regions and stand structure optimization in mid-altitude forests-are essential for reconciling regional ecosystem service trade-offs.