This study explored the spatiotemporal characteristics of drought and ecosystem services (using soil conservation services as an example) in the YanHe Watershed, which is a typical water basin in the Loess Plateau of China, experiencing soil erosion. Herein, soil conservation was simulated using the Soil and Water Assessment Tool (SWAT), and the relationship between drought, soil conservation services, and meteorological, vegetation, and other factors since the implementation of the ‘Grain for Green’ Project (GFGP) in 1999, were analyzed using the gray relational analysis (GRA) method. The results showed that: (1) The vegetation cover of the Watershed has increased significantly, and evapotranspiration (ET) increased by 14.35 mm∙a−1, thereby increasing water consumption by 8.997 × 108 m3∙a−1 (compared to 2000). (2) Drought affected 63.86% of the watershed area, gradually worsening from south to north; it decreased in certain middle areas but increased in the humid areas on the southern edge. (3) The watershed soil conservation services, measured by the soil conservation modulus (SCM), increased steadily from 116.87 t∙ha−1∙a−1 in 2000 to 412.58 t∙ha−1∙a−1 in 2015, at a multi-year average of 235.69 t∙ha−1∙a−1, and indicated great spatial variations, with a large variation in the downstream and small variations in the upstream and midstream areas. (4) Integrating normalized difference vegetation index (NDVI) data into SWAT model improved the model simulation accuracy; during the calibration period, the coefficient of determination (R2) increased from 0.63 to 0.76 and Nash–Sutcliffe efficiency (NSE) from 0.46 to 0.51; and during the validation period, the R2 increased from 0.82 to 0.93 and the NSE from 0.57 to 0.61. (5) The GRA can be applied to gray control systems, such as the ecosystem; herein, vegetation cover and drought primarily affected ET and soil conservation services. The analysis results showed that vegetation restoration enhanced the soil conservation services, but increased ET and aggravated drought to a certain extent. This study analyzed the spatiotemporal variations in vegetation coverage and the response of ET to vegetation restoration in the YanHe Watershed, to verify the significant role of vegetation restoration in restraining soil erosion and evaluate the extent of water resource consumption due to ET in the semi-arid and semi-humid Loess-area basin during the GFGP period. Thus, this approach may effectively provide a scientific basis for evaluating the ecological effects of the GFGP and formulating policies to identify the impact of human ecological restoration on ecosystem services.