The Yangtze River source area is located in the Sanjiangyuan Nature Reserve of China. As the source of the Yangtze River, it is a key link in the development and utilization of the Yangtze River and environmental protection. This study analyzed the natural environment state changes from the perspective of land use/coverage in the source area, and analyzed the remote sensing data of the Yangtze River source area from 1980 to 2010 using ENVI and ArcGIS. The land use dynamics, comprehensive degree index and transfer matrix were taken as evaluation indicators. The results showed that the landform types in the Yangtze River source area are mainly grassland and bare land, whereas the construction land and cultivated land are the least. During the period from 1980 to 2010, the area of water decreased the most, and the area of bare land increased the most. Compared with the initial stage, the natural environment of the source area decreased. The strongest period of land use development happened in the period of 1990 to 2000. With the establishment of the Sanjiangyuan Nature Reserve in 2000, the land use in the Yangtze River source area in 2000-2010 improved towards the recovery direction.