To study the impact of environmental regulations on regional development efficiency through water resources utilization in water source area of middle route of the South-to-North Water Diversion Project, baseline regression model, mediation effect model, and threshold effect model were constructed to empirically analyze the relationships between environmental regulations, water resources utilization efficiency, and high-quality economic development based on panel data of 12 cities in water source area of middle route of the South-to-North Water Diversion Project from 2005 to 2022. The results show that environmental regulations have a positive promoting effect on high-quality economic development, and the promoting effect is heterogeneous in different regions. The promoting effect of environmental regulations is more significant in areas with low water consumption, while in areas with high water consumption, the abundance of water resources restricts the promoting effect of environmental regulations on high-quality economic development. In the areas affected by environmental regulations, water resources utilization efficiency plays a significant mediation role in the process of high-quality economic development,and the mediation effect of water resources utilization efficiency accounts for 13.5% of the overall promoting effect of environmental regulations. Water resources utilization efficiency exhibits a threshold effect in the impact of environmental regulations on high-quality economic development. When the water resources utilization efficiency exceeds 4.3, the promoting effect of environmental regulations on high-quality economic development is significantly enhanced.