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Studying the impact of vegetation dynamics on hydrological processes is essential for environmental management to reduce ecological environment risk and develop sustainable water management strategies under global warming. This case study simulated the responses of streamflow to vegetation cover degradation under climate variations in the Xilin River Basin in a semi-arid steppe of northern China. The snowmelt and river ice melting processes in the Soil and Water Assessment Tool (SWAT) were improved to estimate the changes in streamflow under multiple scenarios. Results showed that the improved SWAT simulations matched well to the measured monthly streamflow for both calibration (determination coefficient R-2 = 0.75 and Nash-Sutcliffe E-NS = 0.67) and validation periods (R-2 = 0.74 and E-NS = 0.68). Simulations of vegetation change revealed that obvious changes occurred in streamflow through conversion between high and low vegetation covers. The reductions in vegetation cover can elevate streamflow in both rainfall and snowmelt season, but the effects are most pronounced during the rainfall seasons (i.e., the growing seasons) and in drier years. These findings highlight the importance of vegetation degradation on modifying the hydrological partitioning in a semi-arid steppe basin. We conclude that in a particular climate zone, vegetation cover change is one of the important contributing factors to streamflow variations. Increases in streamflow in water-limited regions will likely reduce the effective water content of soil, which in turn leads to further degradation risk in vegetation. Therefore, vegetation cover management is one of the most effective and sustainable methods of improving water resources in water-constrained regions.