Payments for watershed ecosystem services (PWES) has become an essential instrument for global ecological governance since it can provide incentives for watershed conservation. In PWES, stakeholders are interconnected, different incentive mechanisms coexist, and multiple externalities coexist. However, existing studies fail to consider the optimization of PWES’s incentive policies systematically under the framework of market-oriented environmentality, which makes the designed PWES too ideal. The complexity of inter-basin in the South-North Water Transfer Project (SNWTP) makes it an ideal case for examining the optimization of PWES’s incentive policies. Therefore, the project will first identify and examine the stakeholder interconnection mechanisms of four PWES incentive mechanisms according to the theory of market-oriented environmentality. Second, the project will optimize the incentives between providers and investors by constructing benefit-sharing and cost-sharing game models and taking the SNWTP as a case. Finally, the project will optimize the incentives between providers, investors, and governments by constructing a two-stage dynamic game model for government subsidies and a trilateral evolution game model for government regulation and taking the SNWTP as a case. The results could not only contribute to the formulation of PWES’s incentive policies and promote the construction of ecological civilization from the perspective of market-oriented environmentality, but also help to deepen the understanding of PWES’s incentive mechanisms and promote the integrated development of management science and ecology.