Wide Participation and cooperation among scientists, social economists, public and government are critical to efficient natural resource management. Environmental management authorities in China are now facing challenges of constructing a comprehensive and integrated framework for protecting environment, conserving natural resources and improving ecosystem function, with administrative boundaries as a barrier. In this paper, we use comparative analysis approach and satellite change detection analysis to study Lugu Lake watershed ecosystem, which is a trans-boundary lake lying at the border of Sichuan and Yunnan Province, south-west China. Four factors that may greatly influence Lugu Lake watershed ecosystem are selected and compared between Sichuan and Yunnan portion of our study area at five different scales: province, city, county, town and village. These four factors are environmental management approaches, natural environment, local society and economy. To quantitatively analyze and compare the structure and function difference of Lugu Lake watershed ecosystem between Sichuan and Yunnan portion, we build an index system based on key environmental elements, including land-cover, forest stand structure, the value of ecosystem service, normalized difference vegetation index (NDVI), and calculate their values in these tow portions of our study area. Driving force for Lugu Lake ecosystem function division is analyzed and countermeasures for trans-boundary watershed management are provided. Results showed that Lugu Lake watershed ecosystem was facing different degree of tourism pressure, agriculture pressure, public participation and environmental management approaches between Sichuan and Yunnan portion. Particularly, Lugu watershed ecosystem in Yunnan portion faces much more tourism pressure and public attention. The environmental management authorities developed more environmental-friendly regulations. The area of Lugu watershed ecosystem in Sichuan province faced more agriculture pressure. Satellite image interpretation showed that the most obvious difference in land-cover between Sichuan and Yunnan province of the study area was the forest ecosystem. In Sichuan province 71.16% of land was covered by forests, while forest covered 52.71% of land in Yunnan province. The data collected from 40 forest field plots showed that Yunnan province had more primeval forest than Sichuan province in the study area, while NDVI results showed an opposite trend in the number of areas with increasing vegetation index (28.59% in Sichuan and 25.58% in Yunnan). Although Sichuan province contributed more to the total value of Lugu Lake watershed ecosystem service in our study area (3847.05×10⁵ yuan renminbi (RMB) for the Sichuan portion and 2637.52×10⁵ yuan for the Yunnan portion), Yunnan exceeded Sichuan in the value per km². No single factor was found driving ecosystem change on either side of the border. We concluded that different pressure of human activities, especially tourism pressure, environmental management consciousness, and management approaches of local environmental management authorities, such as the implement of the Regulations on Restoring Farmland to Forest, were the major causes of the change in watershed ecosystem along Sichuan and Yunnan border of our study area.