As a part of the supply of ecosystem services, land and water resources are an important factor restricting economic development in mountainous areas. Taking the Hengduan Mountains Area as a case study, we evaluated the degree of matching between land and water resources and economic development using the Gini coefficient method. Furthermore, the sensitivity of economic growth to land-water factors was analyzed by establishing an extended Cobb-Douglas function based on the individual stochastic effect model. In addition, the growth drag model was introduced to measure the restriction of land-water resources on economic development in the study area quantitatively. The research produced several important results: (1) From 2006 to 2015, the fluctuation ranges of the Gini coefficient between land and water resources and gross domestic product (GDP) in the study area were 0.265-0.298 and 0.389-0.424, respectively. The satisfaction by water resources in different industries was relatively reasonable, but the utilization of land resources for economic development was not satisfactory, especially in the secondary and tertiary industries. (2) The sensitivity analysis results showed that the elasticity of land resources in the region was about twice that of water resources. The cumulative contribution rate of land resources was significantly higher than that of water resources, and the contribution of land resources to economic growth was greater than that of water resources. (3) The average growth drag values of land and water resources were 0.012 and 0.022, respectively, indicating that both land and water resources had obvious restraining effects on the economic development, which was greatly restricted by land resources. The research showed that effective development of mountainous areas in China should focus on the sufficient land-water resources demanded by economic growth. Utilizing the potential of land-water resources and increasing their supply can reduce restriction on economic growth and promote sustainable development.