Habitat quality assessments are of great significance for protecting biodiversity. This study analyzes the changing habitat quality of Lashihai watershed based on SPOT satellite images. We extracted the land use data for Lashihai watershed in Yunnan province for the years 2000 and 2015, and then used an InVEST model to evaluate habitat degradation, habitat quality and habitat scarcity in the study area from 2000 to 2015. Spatial statistical methods were used to determine changes to spatial dynamics. Results indicate that the number of areas with habitat degradation was generally small, and that both the number of areas with habitat degradation and the degree of degradation had fallen noticeably during the fifteen-year study period. In general, the quality of habitats was maintained or improved, while the quality of habitats decreased in only a few areas. The scarcity of habitats for cultivated land had increased, the tension between people and land use was relatively prominent. The reason habitat quality in Lashihai watershed has improved can be attributed to three factors: 1) The policy of returning farmland to forests since 2000 has been well implemented and has achieved remarkable results. Loss of forests from logging and deforestation has basically been eliminated, and great progress has been made restoring the ecological environment. 2) High background value of quality habitat suitability benefits from the research area's high vegetation coverage. 3) The development of the local tourism economy has transformed the area's ecological advantages into an economic bonus, greatly increasing the income level and living standards of residents. At the same time, the ecological resource bonus has increased the enthusiasm of residents for ecological protection and has helped to promote the protection of local eco-systems, both reducing ecological degradation and improving habitat quality. At the same time, increasing conflicts between land and people should be addressed. Support is needed to promote development of the ecological economy while continuously reducing ecological degradation and further increasing residents' income. There must be less reliance on industry and less pressure on both land and people, all the while ensuring that the local economy and ecology can more forward together in a sustainable way.