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Revegetation of degraded ecosystems provides opportunities for carbon sequestration and bioenergy production(1,2). However, vegetation expansion inwater-limited areas creates potentially conflicting demands for water between the ecosystem and humans(3). Current understanding of these competing demands is still limited(4). Here, we study the semi-arid Loess Plateau in China, where the ’Grain to Green’ large-scale revegetation programme has been in operation since 1999. As expected, we found that the new planting has caused both net primary productivity (NPP) and evapotranspiration (ET) to increase. Also the increase of ET has induced a significant (p < 0.001) decrease in the ratio of river runoff to annual precipitation across hydrological catchments. From currently revegetated areas and human water demand, we estimate a threshold of NPP of 400 +/- 5 g C m(-2) yr(-1) above which the population will suffer water shortages. NPP in this region is found to be already close to this limit. The threshold of NPP could change by 36% in the worst case of climate drying and high human withdrawals, to C 43% in the best case. Our results develop a new conceptual framework to determine the critical carbon sequestration that is sustainable in terms of both ecological and socio-economic resource demands in a coupled anthropogenic-biological system.