The concentration of Greenhouse Gas (GHG) in the atmosphere has sharply increased since the Industrial Revolution, leading to climate warming and severe environmental problems. It has become a consensus that GHG emissions of large reservoirs essentially constitute inland aquatic GHG emissions. However, questions remain regarding whether small karst reservoir (SKR) is only a substantial source of GHG emissions like large reservoirs, and how much GHG emission it can offset by affecting the terrestrial carbon sink (TCS) of its controlled basin. We selected two basins in the karst area of southwestern China, with built and planned SKRs, and quantitatively analysed the impact of the SKR on basin-scale water and carbon cycles during 2000–2020 using multi-source remote sensing data and the Google Earth Engine. Results showed that the associated increase in the TCS in the SKR-controlled basin can completely offset the GHG emissions and TCS losses caused by submerged land, resulting in a 21.48 % faster increase rate of TCS and a 12.20 % greater increase in TCS caused by human activities than in non-karst reservoir basin. Meanwhile, by intercepting both surface and groundwater runoff, the SKR-controlled basin showed a 329.55 % faster increase rate of available surface water resources than the non-karst reservoir basin, alleviating the problem of engineering water shortages and enhancing the drought resistance capacity. Moreover, in the three major karst areas worldwide, and especially in southwestern China, faster vegetation restoration and TCS increase exist in most SKR-controlled basins, and this increase is enhanced with increasing proximity to the water surface. This study revealed that SKR is more than a substantial source of GHG emissions; it can also effectively enhance the TCS and available surface water resources in controlled basin, which is of great significance for achieving carbon neutrality goals while maintaining the sustainability of water and carbon cycle in karst areas.