Xining city is located in the east of the Qinghai-Tibetan Plateau. With the development of human activities, studying spatial transformation regulation of land use and land cover change (LUCC) in this region is important to reveal the driving mechanism of the regional changes caused by environmental improvement campaign. These changes included land use patterns of animal husbandry in urban and rural areas, eco-environmental effects, socioeconomic situation , etc. GIS and the related models were applied to interpret precisely Landsat-TM remote sensing image of Xining city in 1999 and 2005, and quantitative statistic and phasor diagram on land use / cover had been worked out. Dynamic characteristics of LUCC were analyzed, and Markov transition matrix of various land use types was calculated by using map algebra as well. The results showed that cropland, grassland and uncultivated land were main types of LUCC in Xining city from 1999 to 2005. Variation of land use pattern had taken place promptly in 73.58% of the study area. Wetlands area such as rivers, lakes, etc. grassland area and woodlands area increased significantly during six years, indicating strong positive consequence of environmental improvement campaign in Xining since 2000. Results of simulation and prediction showed that under conditions of constant external impacts, cropland area in Xining city would continue to decrease, and construction land area such as buildings, roads, etc. will increase in the coming ten years. Increase of woodlands, grassland, rivers, lakes as well as wetland is certainly favorable to ecological environment.