The stable carbon isotope composition (δ13C) of tree rings in a climate-sensitive region can provide a retrospective view of changes in environment and climate. Here, we report on the development of the first annually resolved δ13C tree ring chronology obtained from natural forests on the northeastern Tibetan Plateau. Climate data show a warming trend and more frequent droughts occurring in the research region since the 1970s. The isotope record of Qinghai spruce (Picea crassifolia) spans the period 1890–2002 with a general decreasing trend over the last century followed by an abrupt increase in δ13C over the last decade. The stable carbon discrimination against heavier atmospheric carbon (Δ13C) is negatively correlated to May temperature and positively correlated with June–July precipitation. The regional Palmer drought severity index (PDSI) correlated significantly with Δ13C series after 1960, whereas this relationship was not stable over the period 1933–1960. However, much stronger correlations were observed between the high-frequency anomalies in annual Δ13C and PDSI in June and July during the period 1933–2002. The temporal stability analysis revealed trends in the response to drought stress affecting tree's Δ13C linked to climatic warming. Intrinsic water-use efficiency increased by 7.7% in Qinghai spruce in response to increased severity of regional drought during the 1990s compared to the average of the previous decade. Our preliminary results suggest that carbon isotope in certain tree taxa growing on Tibetan Plateau may be an effective proxy for reconstructing regional drought.