Studying the influence of the natural environment and human activities on river water environment is of great significance for the management and protection of river basin water resources. Systematic and long-term research on water environment of the Lhasa River Basin is needed to provide necessary technical support for scientific decision-making. Based on the water quality data of three environmental monitoring stations in the Lhasa River Basin (Dazi, Kalin, and Caina) over the past 20 years (1995-2014), the single factor index method and the Nemerow index method were applied to assess the water environment. The Mann-Kendall test was used to analyze the multi-year trends of the water environment. Further, the key driving factors affecting change in the water environment of the river basin were identified from the economic, social, and natural environment using the grey correlation analysis method, which can provide a reference for protection of the watershed water environment. The results showed that:(1) the overall water quality at the three environmental monitoring stations was in good condition and met the requirements of the water function zone; (2) the index of pH, dissolved oxygen, ammonia nitrogen, and total phosphorus was about 0.7 (higher than other indexes), and could be the main indexes affecting the water environment in Lhasa River Basin; (3) the water environment of the Lhasa River basin was in good condition with a certain degree of a downward trend, and the Nemerow index increased from 0.62 in 1995 to 0.73 in 2014; (4) The water environment has changed in the Lhasa River basin in the past 20 years, and was mainly affected by precipitation, livestock stock population, rural population, and GDP. The main source of pollution in the Lhasa River basin was non-point source pollution from rural areas and agriculture, which should be focused on and controlled in the future.