Assessments of the effect of land-use change and the ecosystem service value (ESV) provide critically important information that has implications for ecological protection and the rational allocation of resources in terrestrial ecosystems, especially for fragile and threatened ecosystems in arid lands. Here, we used the modified ESV evaluation and hotspot analysis methods to analyze land use cover change and ESV from 1995 to 2018 in the Bosten Lake watershed. We found that (1) the area of dry land and construction land increased continuously; the area of desert, meadow, wetland, water area, and shrubland exhibited a fluctuating increasing pattern; and the area of bare land, grassland, glacier snow, broadleaf forest, and coniferous forest showed a fluctuating decreasing pattern. (2) The ESV first decreased, then increased, decreased again, and then increased. The ESV indicates that regulation and supporting services were the main services provided. Water area, meadow, and grassland were the main factors contributing to ESV change:water area and meadow contributed positively, whereas grassland contributed negatively. (3) ESV was higher in the northwest than in the southeast. The only high-value agglomeration area (Bosten Lake) was distributed in the area of low ESV. The ESV significantly varied along the north-south gradient in the watershed. The annual average area of wetland and water area, which occupied 3.61% of the entire study area, is the focus of environmental protection and ecological construction in the Bosten Lake watershed. (4) The ESV hotspot area varied little during the study period, and the ESV cold spot area was larger than the hotspot area and decreased throughout the study period. Conversions between desert, grassland, meadow, and bare land systems were frequent, which led to significant variation in the ESV in the northern part of the study area. The increase in the size of the oasis resulted in a change in the cold spot area in the southern part of the study area.