From the perspective of adaptive river basin management, health assessment based on an eco-environmental investigation was used to determine the health state, analyze the pressure influence and diagnose the main problems of watershed ecosystems. The Chao River and Bai River basins, located upstream of the important drinking water source of Beijing (the Miyun Reservoir), were selected as an example for such an assessment. The established index system for the assessment includes 13 indicators, which cover aspects of habitat structure, aquatic organisms, ecological patterns, ecological functioning, and ecological pressure. The health states of water and land areas of the studied basins were evaluated by comparing their state indicator scores, to consequently determine the weakness of the basins' ecosystems. In addition, the major cause for ecosystem health degradation was analyzed by contrasting the ecological pressure indicator scores. The results show that the health states of water land areas of the Chao River and Bai River basins were good. However, the aquatic organisms and ecological patterns were in a poor state. Furthermore, the indices of organism diversity and landscape fragmentation in the Bai River basin acquired a relatively low score, whereas organism diversity, landscape fragmentation, and forest cover score were comparatively low in the Chao River basin. The health pressure assessment showed that indices of aquatic habitat disturbance and pollution load discharge scored low. This observation indicates that in the Chao River and Bai River basins, river habitat damage resulting from anthropogenic disturbances and pollutants are the dominant pressures on ecosystem health. The comprehensive indices of watershed health for the Chao River and Bai River basins have been 78 and 71, respectively, indicating the health levels of both are in relatively good condition. There were a few differences among the health states of 14 sub-basins. Sub-basins of the Liuli River, downstream of the Bai River, and upstream of the Tang River, displayed a relatively better health state. In contrast, the health state of sub-basins of the Chao River (middle-downstream), and Xiaotang River were relatively worse. According to field investigation, excessive livestock breeding, bankside planting, and local tourism in the basin were the main causes of the degradation of watershed health. In order to improve the watershed health state, control on the pollution load and supervision of wading activities that disturb the aquatic habitat should be enhanced. Furthermore, for the Chao River and Bai River basins, the biological index is a more effective indicator than physical and chemical indices. The diversity of benthic animals is very closely related to the condition of river habitat, because some benthic species are sensitive to river habitat destruction caused by excessive wading activities. Therefore, to realize sustainable and adaptive watershed management, and to guarantee the water ecological security of the Miyun Reservoir, more attention should be paid to biotic indices that can effectively indicate the early stages of ecosystem degradation.