Understanding hydrological responses to climate change and land use and land cover change (LULCC) is important for water resource planning and management, especially for water-limited areas. The annual streamflow of the Wuding River Watershed (WRW), the largest sediment source of the Yellow River in China, has decreased significantly over the past 50 years at a rate of 5.2 mm/decade. Using the Budyko equation, this study investigated this decrease with the contributions from climate change and LULCC caused by human activities, which have intensified since 1999 due to China’s Grain for Green Project (GFGP). The Budyko parameter that represents watershed characteristics was more reasonably configured and derived to improve the performance of the Budyko equation. Vegetation changes were included in the Budyko equation to further improve its simulations, and these changes showed a significant upward trend due to the GFGP based on satellite data. An improved decomposition method based on the Budyko equation was used to quantitatively separate the impact of climate change from that of LULCC on the streamflow in the WRW. Our results show that climate change generated a dominant effect on the streamflow and decreased it by 72.4% in the WRW. This climatic effect can be further explained with the drying trend of the Palmer Severity Drought Index, which was calculated based only on climate change information for the WRW. In the meantime, although human activities in this watershed have been very intense, especially since 1999, vegetation cover increase contributed a 27.6% decline to the streamflow, which played a secondary role in affecting hydrological processes in the WRW.