Abstract: This study aims to maximize the water-saving potential of inland river basins in cold and arid areas and demonstrate the feasibility of replacing plains reservoirs with mountain reservoirs. The "Three Sources and One Mainstream" of the Tarim River basin (i.e., Aksu River, Yarkand River, Hotan River, and the Tarim River mainstream) are employed as the research objects. According to the guidance of the"Water Saving Priority"water control strategy, the water demand of various industries, plains reservoirs, and mountain reservoirs are considered. Moreover, simulation and optimization models of cascade reservoir operation and allocation in current and future years are established and then solved. Results indicate that: ① The key to saving water in cascade reservoir operation is to reduce ineffective loss through evaporation and leakage in river channels and plains reservoirs. ② Through the optimal operation and allocation of mountain reservoirs, the maximum water-saving potential will be 246 million m³ by 2035. ③ The plan for replacing plains reservoirs with mountain reservoirs is formulated, i.e., the storage capacity of the six plains reservoirs of Jieranlike, Dazhai, Qiman, Paman, Kaerquga, and Tarim will be reduced by 17%, 17%, 17%, 33%, 100%, and 100%, respectively. This scheme can increase the water-saving potential of 21 million m³ while ensuring the water supply task of the mainstream of the Tarim River. These research findings provide theoretical and technical support for realizing the scientific regulation of water resources and ensuring regional water security and ecological security.