To combat water scarcity in arid regions, reservoirs are strategically constructed, but their precise influence on the water cycle is not well understood. This study systematically analyses hydrometeorological and stable isotope data from precipitation, river, and reservoir waters using the hydrological observation system at Hongyashan Reservoir. The study revealed that the reservoir notably altered local water cycle processes. The stable isotope compositions of surface water show the changing characteristics of enrichment in summer and depletion in spring and fall, while evaporation controls the stable isotope compositions of surface water in Hongyashan Reservoir. Precipitation in the Hongyashan Reservoir primarily comes from westerly water vapour transport, significantly affected by local intra-continental water vapour recirculation. The average annual evaporation loss from Hongyashan Reservoir is 14.72%, and the contribution ratio of locally recirculated water vapour to precipitation ranges from 18.85% to 38.9%. Our findings highlight the need to consider the impact of local reservoirs on hydrological processes when assessing water resources in arid zones, and to address water losses caused by reservoirs.