The Yellow River, the main source of water for the North and Northwest China, showed a marked decrease in runoff during the 1990s compared to that in the 1980s. Since the basin is extensive, covering many different climatic zones with various land uses, the hydrological processes are very complex. It is necessary to develop and verify a detailed water budget in order to understand changes in the hydrological processes within the basin. In this paper, we describe a hydrological model that considers five categories of land use. The calibration and verification of the model were carried out at two independent watersheds (Tangnaihai, 120 000 km(2) and Lushi, 6400 km(2)). The results from the model represent the hydrographs and annual runoffs at two gauge stations over a relatively long-term period (18 years at Tangnaihai and 21 years at Lushi). The model was applied to other watersheds of the Yellow River basin above Huayuankou station, and water budget components in each region were analysed. The results indicate only a small change in evapotranspiration, but a marked decrease in precipitation, which was significant in all of the analysed areas except the Lanzhou-Toudaoguai inter-watershed area. Water use for agricultural irrigation was stable throughout the entire simulation period. A numerical experiment of water conservation for the whole basin above Huayuankou station demonstrated that if the number of irrigation days was reduced by 20, 40 or 60%, the amount of water used could be reduced by 26.6, 52.1 or 80.7%, compared to the current situation. Copyright (C) 2010 John Wiley & Sons, Ltd.