Watershed water regulation and its stability are crucial for accurately tracking the sources of water resource depletion and continuously improving water resources conditions. Thus, a water regulation function (WRF) index system and a water regulation coefficient were established from the physical process of watershed absorption and discharge of incoming water. These were coupled with the SWAT model and the constructed hydrological resilience assessment model to quantitatively analyze the WRF and its stability evolution law in a semi-arid watershed. The results showed that the watershed exhibited water storage over the past 42 years, and the water storage intensity significantly decreased (R = -0.57, P < 0.01) by the influence of increased precipitation and greater soil viscosity of vegetation. Compared to grasslands with stronger water storage, forested areas at higher elevations with abundant precipitation exhibited stronger water discharge. However, with the substantial increase of temperature and the intensive planting of arbor forest, the WRF of local forests shifted from water discharge to water storage, exacerbating the local water resource deficits. In addition, the poor adaptability of aquifer water storage level led to the continuous decrease of WRF stability, while the strengthening fitness of surface water production efficiency and soil water yield intensity was key to maintaining a higher stability level. Moreover, the WRF in a large area of the watershed improved from almost loss or extremely fragile to barely maintaining stability or quickly restoring stability. With the continuous expansion of the water storage range, the root water storage capacity and soil moisture storage efficiency became the key factors affecting the WRF stability in most areas. Our finding has important guiding value for the rational utilization of watershed water resources and the restoration of vegetation by local conditions.