Watersheds provide a spatial framework for tightly coupling human activities and the natural environment. Investigating the spatial distribution patterns of traditional villages within watersheds is crucial for comprehending their origins and advancing conservation and development efforts. This study employs methods such as the nearest neighbor index, kernel density estimation, spatial auto-correlation analysis, stepwise regression, and geographically weighted regression to explore the watershed characteristics and influential factors governing the spatial differentiation of traditional villages in Fujian Province. The findings indicate that traditional villages in Fujian exhibit an overall clustered distribution within the watershed space, with a tendency to cluster along basin boundaries, primarily concentrated in three hot spot regions. In the remaining small watersheds, the distribution is more balanced. Traditional villages are predominantly located near low-order streams, displaying a distribution pattern along tributaries, while in the Huotongxi river basin, they are more evenly distributed near second-, third-, and fourth-order streams. Relief, annual average temperature, annual average precipitation, arable land, per capita GDP, distance to county-level or higher-grade cities, and the concentration of cultural heritage preservation units are the primary factors affecting the spatial differentiation of traditional villages within watersheds, exhibiting significant spatial heterogeneity. Finally, this study proposes recommendations for the cluster protection and development of traditional villages in watersheds, addressing spatial, cultural, landscape, industrial, and governance aspects.