Forest structure and ecosystem function/service relationships have attracted considerable attention; however, knowledge of how forest structure systematically affects water conservation function is still lacking. Such research is urgently needed in Qinghai Province, China's Water Tower, to guide forest structure optimization for plantations with weak water conservation functions. Since healthy, stable tree growth is crucial for forests to fulfill their water conservation functions, this study examined the impacts of forest structure on tree growth. We investigated 115 plots in Qinghai Province and analyzed tree size, size heterogeneity, species diversity, competition and spatial distribution effects on the individual tree growth and water conservation function of Picea crassifolia Kom. using mixed-effect and structural equation models, respectively. Forest structure was important in modulating tree growth and the water conservation function. Tree size had the greatest impact on growth performance and directly enhanced the water conservation function. High-size heterogeneity increased the tree growth rate and directly and indirectly improved the water conservation function via competition. Both individual growth and water conservation function were negatively related to competition between trees. Species diversity promoted P. crassifolia growth under a given degree of neighbourhood competition and indirectly affected the water conservation function by increasing size heterogeneity and reducing competition. An uneven spatial distribution did not influence tree growth but positively affected the water conservation function. Therefore, we emphasize that for plantations to fulfill their water conservation functions, pure forests with homogeneous structures should be transformed into mixed forests with heterogeneous structures.