Forest restoration in dryland mountainous areas is extremely difficult due to dry climate, complex topography and accelerating climate change. Thus, exact identification of suitable sites is required. This study at a small watershed of Qilian Mountains, Northwest China, aimed to determine the important factors and their thresholds limiting the spatial distribution of forests of Qinghai spruce (Picea crassifolia), a locally dominant tree species. The watershed was divided into 342 spatial units. Their location, terrain and vegetation characteristics were recorded. Statistical analysis showed that the potential distribution area of Qinghai spruce forests is within an ellipse with the axes of elevation (from 2673.6 to 3202.2 m a.s.l.) and slope aspect (from -162.1° to 75.1° deviated from North). Within this ellipse, the forested sites have a soil thickness ≥40 cm, and slope positions of lower-slope, lower- or middle-slope, anywhere if the elevation is <2800, 2800-2900, >2900 m a.s.l, respectively. The corresponding mean annual air temperature at upper elevation boundary is -2.69 °C, while the mean annual precipitation at lower elevation boundary is 374 (331) mm within the small watershed (study area). The high prediction accuracy using these 4 factors can help to identify suitable sites and increase the success of afforestation.