Abstract: This study aims to systematically reveal the internal operating mechanism of watershed ecological compensation and to resolve the interest imbalances and coordination dilemmas in cross-regional watershed governance. Existing research mostly focuses on fragmented case summaries and lacks a quantitative closed-loop mechanism framework. To fill this gap, we integrated theories of public goods, institutional collective action, opportunity cost and ecosystem service value. A five-dimensional coupling mechanism system of "responsibility definition - cost quantification - interest coordination - incentives and restraints - collaborative governance" was constructed. Meanwhile, quantitative models with adjustable parameters were established, including full-cost accounting, opportunity-cost estimation, differentiated compensation, and two-way reward-penalty mechanisms. Four typical watersheds with remarkably different endowments were selected for empirical verification: Chishui River, Tarim River, Jiuzhou River and Xin'an River. The applicability of the five-dimensional coupling mechanism framework was tested. We further summarized five core dilemmas in practical mechanism operation. These dilemmas include ambiguous responsibility, incomplete accounting, interest imbalance, weak incentives and insufficient collaboration. The results show that watershed ecological compensation is essentially a cross-regional interest rebalancing and collective-action coordination mechanism. Its effective operation follows the closed-loop logic of "clear definition, scientific accounting, reasonable distribution, effective incentives and integrated collaboration". Mechanism implementation effects differ greatly among various watershed types. Arid inland rivers and water-source conservation pilot watersheds commonly have defects in cost-accounting dimensions, whereas watersheds under legalized governance face the problem of underdeveloped market-oriented compensation. Finally, we propose targeted optimization paths based on the five-dimensional coupling mechanism. The paths cover clarifying responsibilities through legislation, quantitative accounting, diversified coordination, strict reward-penalty, and collaborative governance, providing theoretical support and reference for the institutionalized and refined development of China's watershed ecological compensation mechanism.