Water budge is an important indicator for water resource sustainability. It is critical to quantitatively analyze the water budget, yet challenging due to complex and dynamic hydrological processes such as precipitation, runoff, evapotranspiration, and soil water storage. In this study, we estimated the dynamics of water budget in an alpine meadow ecosystem based on the meteorological observation during the years 2014 and 2015 at the A'rou site in the Heihe River Basin (HRB). In addition, we partitioned the process of evapotranspiration into vegetation transpiration and soil evaporation by using the two-source model to understand the process of water budget. Our results showed that vegetation transpiration was the major cause of water consumption in the alpine meadow ecosystem during the two-year growing season. Mean ratios of transpiration to evaporation (T/ET) during the growing seasons of 2014 and 2015 were 0.74 and 0.79, respectively. The surface soil layer (0-40 cm) changed significantly compared with the other soil layers and dramatically affected by the freeze-thaw process. In the rainy year (2014), the water budget remained basically balanced, and a 42-mm surface runoff was generated during the growing season; however, in 2015, evapotranspiration exceeded precipitation, leading to a decrease in soil moisture. The results estimated from the two-source model were consistent with the observed data, with a correlation coefficient of 0.90. The analysis of model sensitivity indicated negligible error from the variables of model input. The above results demonstrated the successful application of the two-source model for the partition of evapotranspiration in an alpine meadow ecosystem.