Vegetation change is a critical factor that profoundly affects the terrestrial water cycle. Here we derive an analytical solution for the impact of vegetation changes on hydrological partitioning within the Budyko framework. This is achieved by deriving an analytical expression between leaf area index (LAI) change and the Budyko land surface parameter (n) change, through the combination of a steady state ecohydrological model with an analytical carbon cost‐benefit model for plant rooting depth. Using China where vegetation coverage has experienced dramatic changes over the past two decades as a study case, we quantify the impact of LAI changes on the hydrological partitioning during 1982–2010 and predict the future influence of these changes for the 21st century using climate model projections. Results show that LAI change exhibits an increasing importance on altering hydrological partitioning as climate becomes drier. In semiarid and arid China, increased LAI has led to substantial streamflow reductions over the past three decades (on average −8.5% in 1990s and −11.7% in 2000s compared to the 1980s baseline), and this decreasing trend in streamflow is projected to continue toward the end of this century due to predicted LAI increases. Our result calls for caution regarding the large‐scale revegetation activities currently being implemented in arid and semiarid China, which may result in serious future water scarcity issues here. The analytical model developed here is physically based and suitable for simultaneously assessing both vegetation changes and climate change induced changes to streamflow globally. Key Points We derive an analytical solution for the impact of LAI changes on hydrological partitioning within the Budyko framework Sensitivity of hydrological partitioning to changes in LAI increases with the increase of climate aridity Impacts of past and future vegetation and climate changes on streamflow across China were assessed