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Land degradation is a global environmental problem that threatens human safety and socioeconomic development. In order to alleviate severe soil erosion, China has implemented historically unprecedented large-scale afforestation. In this study, we selected the most severely eroded Loess Plateau as a case, to assess the effectiveness of soil and water conservation (SWC) efforts based on the Revised Universal Soil Loss Equation. In addition, the underlying drivers for soil erosion changes and hydrological effects of SWC were investigated, and finally the potential policy implications of our findings were discussed. The soil erosion intensity from 2000 to 2015 was weakened largely due to favorable climate conditions and SWC efforts, which promoted vegetation restoration and enhanced soil retention. However, there was a significant trade-off between water provision and soil retention functions. The excessively artificial afforestation reduced sediment yield but depleted surface runoff. Furthermore, artificial afforestation and increasing irrigation water consumption overused groundwater resources and finally lowered groundwater table. The SWC efforts characterized by artificial afforestation induced soil moisture declining, particularly for the conversion type of farmland to forest/ shrub. Our results suggested that afforestation might be a poor choice in arid and semiarid regions, because it did not consider local precipitation conditions, and have exacerbated water shortages and offset SWC efforts. Therefore, the future ecological restoration efforts should be transformed from simple species-based measures to optimal plant species combinations to minimize the tradeoff between water yield and soil retention. The strategies for ecological restoration of drylands should also account for water balance to ensure effectiveness and sustainability.