Ecosystem services (ES) and Human well-being (HWB) constitute two fundamental components of sustainable development. However, the intricate interdependence and feedback between them are difficult to quantify. Livelihoods serve as critical mediators between ES and HWB, providing a novel approach to examine their interactions. This study took desert steppe area of Inner Mongolia, China as the study area, by integrating the sustainable livelihood framework, analyzed livelihoods, well-being, and ES at the household scale, revealed the interactions among ES, livelihoods, and HWB at three levels by the path analysis model. Results showed natural and financial capitals were the main constraints on pastoral livelihoods. ES (grass yield, water yield, soil conservation, and carbon storage) increased southward, while firewood supply and carrying capacity of livestock showed spatial heterogeneity. Objective well-being (OWB) remained low despite high subjective well-being (SWB), reflecting material-psychological disparities. Overall, ES enhanced OWB, while livelihood capitals paradoxically degraded ES yet improved OWB. At the subtypes level, regulatory service positively impacted OWB, natural capital negatively affected provisioning and regulatory service. Natural, physical, human, and social capitals improved OWB. At the indicator level, livelihood capitals, such as adult male labor and other factors were identified as critical mediated factors. The study advances ES-HWB theoretical frameworks, offering actionable insights for balancing ecological conservation and pastoral households' well-being in arid ecosystems.