Due to geographical disparities in economic development, population distribution, and water resources, many watersheds have implemented water diversion projects. These projects have increased the number of stakeholders in watershed ecological compensation, making game theory characteristics more pronounced and complex. However, analysis often overlooks the natural upstream-downstream relationships of watersheds and the human-induced water diversion projects affecting water intake and receiving. Therefore, this study, from a theoretical perspective, focuses on ecological compensation in watersheds with water diversion projects. It develops an evolutionary game model involving four key stakeholders: the central government, upstream water-taking area governments, downstream governments, and water-receiving area governments. The study also explores potential equilibrium points in this model.