Glacial retreat and the thawing of permafrost due to climate warming have altered the hydrological cycle in cryospheric‐dominated watersheds. In this study, we analysed the impacts of climate change on the water budget for the upstream of Shule River Basin on the northeast Tibetan Plateau. The results showed that temperature and precipitation increased significantly during 1957‐2010 in study area. The hydrological cycle in the study area has intensified and accelerated under recent climate change. The average increasing rate of discharge in the upstream of Shule River Basin was 7.9 ×106 m3/year during 1957‐2010. As the mean annual glacier mass balance lost ‐62.4 mm/year, the impact of glacier discharge on river flow has increased, especially after 2000s. The contribution of glacier melt to discharge was approximately 187.99×108 m3 or 33.4% of the total discharge over the study period. The results suggested that the impact of warming overcome the effect of precipitation increase on runoff increase during study period. The evapotranspiration (ET) increased during 1957‐2010 with a rate of 13.4 mm/10 years. Based on water balance and GRACE and GLDAS data, the total water storage change showed a decreasing trend, whereas groundwater increased dramatically after 2006. As permafrost has degraded under climate warming, surface water can infiltrate deep into the ground, thus changing both the watershed storage and the mechanisms of discharge generation. Both the change in terrestrial water storage and changes in groundwater have had a strong control on surface discharge in the upstream of Shule River Basin. Future trends in runoff are forecasted based on climate scenarios. It is suggested that the impact of warming will overcome the effect of precipitation increase on runoff in the study area. Further studies such as this will improve understanding of water balance in cold high‐elevation regions.