Changes in moisture conditions or precipitation in the SE Tibetan Plateau during the Holocene have been studied using various environmental archives and proxies. However, due to different interpretations of the proxies and records, the pattern of Holocene precipitation/moisture variations in the region remains unclear. A lake-sediment-based reconstruction of runoff variations, which can directly and sensitively reflect changes in precipitation, provides the opportunity to reconstruct the evolution of moisture conditions in the SE Tibetan Plateau during the Holocene. In this study, we used a well-dated sediment core (LGH2) from Lake Lugu, a deep alpine lake charged mainly by precipitation on the lake surface and by runoff from the watershed, to reconstruct variations in runoff during the Holocene. In addition, 70 lake surface sediment samples were collected to examine the spatial variation of grain size. Endmember modeling analysis of the grain-size data was used to characterize the processes of sediment transport and runoff fluctuations. The carbonate content of core LGH2 shows that the lake level was generally high during 11,600–3100 cal years BP, and that the lake basin was closed after 3100 cal years BP and semi-closed since 90 cal years BP. Grain-size endmember EM 3, which represents the runoff input clastic materials, is used to reconstruct runoff fluctuations in the Lake Lugu watershed. The record indicates a gradual increase in runoff during 11,600–9000 cal years BP, stable and high runoff during 9000–2000 cal years BP, and weak runoff and a low lake level since 2000 cal years BP. Our reconstruction of runoff fluctuations tracks changes in regional temperature and tropical SSTs rather than in boreal summer insolation. This finding supports the hypothesis that increasing tropical SSTs strengthened ITCZ convection which enhanced the flux of water vapour from the ocean to the air, and hence the moisture supplies to SW China.