Modeling the hydrological processes at catchment scale requires a flexible distributed scheme to represent the catchment topography, river network and vegetation pattern. This study has developed a distributed scheme for eco-hydrological simulation in the upper Heihe River. Based on a 1 km × 1 km grid system, the study catchment is divided into 461 sub-catchments, whose main streams form the streamflow pathway. Furthermore, a 1 km grid is represented by a number of topographically similar “hillslope-valley” systems, and the hillslope is the basic unit of the eco-hydrological simulation. This model is tested with a simplified hydrological simulation focusing on soil-water dynamics and streamflow routing. Based on a 12-year simulation from 2001 to 2012, it is found that variability in hydrological behavior is closely associated with climatic and landscape conditions especially vegetation types. The subsurface and groundwater flows dominate the total river runoff. This implies that the soil freezing and thawing process would significantly influence the runoff generation in the upper Heihe basin. Furthermore, the runoff components and water balance characteristics vary among different vegetation types, showing the importance of coupling the vegetation pattern into catchment hydrological simulation. This paper also discusses the model improvement to be done in future study.