Amid accelerating urbanization and severe biodiversity loss in global drylands, reconciling urbanization with habitat conservation is crucial for sustainable development. Focused on China’s Loess Plateau (LP), a typical arid to semi-arid region, this study quantified the dual effects of urbanization on both the size and quality of natural habitats (NHs) from 1990 to 2050 by multi-scenario land cover simulations with the system dynamics PLUS model, combining landscape indices and habitat quality (HQ) analysis. The study revealed that urbanization directly consumed 3470 km2 of NHs and indirectly resulted in the loss of 4706.4 km2 between 1990 and 2020. Under the SSP5–8.5 scenario, direct and indirect NHs losses are projected to increases of 7.75 and 7.39 times respectively, from 2020 to 2050. Nevertheless, LP’s landscape pattern exhibited an optimizing trend: the increasing aggregation index of urban patches, coupled with an enhanced largest patch index for forests and grasslands, indicates that intensified urbanization can mitigate the disordered encroachment on NHs, reduce landscape fragmentation, and preserve larger and more contiguous habitat patches, thereby improving overall HQ. The LP case demonstrates urbanization and NHs conservation are not inherently antagonistic; well-planned urbanization can catalyze NHs protection. We further proposed strategies including spatially concentrated urbanization to advance sustainable urbanization and enhance HQ, fostering synergies between social progress and ecological preservation in global arid regions.

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