Mountain ecosystems in Asia are highly sensitive to climate change, with shifts in temperature, precipitation, and soil moisture exerting profound effects on vegetation growth and ecological stability. This study integrates long-term soil moisture reconstruction and tree physiological responses to assess recent changes in mountain forest ecosystems on the southeastern Tibetan Plateau. Using a three-century-long tree-ring δ18O-based soil moisture reconstruction, we identify an abrupt wet-to-dry transition in 1884, followed by a declining trend and enhanced variability, with dry summers occurring more frequently since the 1950s. These changes are primarily driven by weakened monsoonal precipitation rather than temperature increases, highlighting the dominant role of hydrological shifts in shaping ecosystem responses. Additionally, we examine the divergent growth responses of two coexisting conifer species, Juniperus tibetica and Picea balfouriana, to rising atmospheric CO₂ and climate variability. Tree-ring width and dual-isotope (δ13C and δ18O) analyses reveal that juniper growth has been stimulated by increased intrinsic water-use efficiency (iWUE), while spruce growth remains constrained by moisture availability. Despite similar iWUE increases (22% for juniper, 26% for spruce) from 1954 to 2007, spruce growth is more sensitive to soil moisture than temperature, underscoring the limitations of CO₂ fertilization effects in moisture-limited environments. These findings emphasize the critical influence of hydrological changes on mountain forest resilience, with implications for predicting future ecosystem responses under ongoing climate change.