Abstract: Horizontal eco-compensation between upstream and downstream areas in transboundary river basins represents a major institutional innovation for balancing regional ecological protection and economic development and for realizing the value transformation of ecological products. We constructed an integrated analytical framework of "Institutional Collective Action – Externality Theory" and systematically reviewed the four evolutionary stages of China's horizontal watershed eco-compensation, from exploration, pilot promotion, comprehensive expansion, to deepening and improvement. Then, we analyzed three major practice models, namely bidirectional performance-based compensation, fund pooling, and joint industrial park development. In light of recent progress in eco-compensation policies and institutions, a multidimensional comparison of eight typical cases was conducted, including the Xin'an River and the Chishui River. The results revealed several structural problems, including oversimplified assessment indicators, administratively determined compensation standards, excessive fiscal dependence in funding channels, and insufficient statutory authority for cross-regional coordination mechanisms. Accordingly, we proposed optimization pathways, including refining the procedural rules for "right-bank priority" and "temporary withholding and deduction", building a "3+N" multidimensional water-land assessment system and dynamic gradient standards, promoting a composite financing and self-sustaining mechanism of "fiscal base + market increment", establishing an institutionalized coordination agency, and expanding direct compensation to frontline ecological protectors. The research can provide a decision-making reference for eco-compensation and systemic collaborative governance in major river basins in China.