Transfer payments in the national key ecological functional areas in China have the dual goals of improving people's livelihoods and governing the ecological environment. Existing research often treats this as a quasi-natural experiment to assess policy effectiveness, but it tends to overlook detailed examinations of the scale effect of transfer payments in such areas. Using panel data from Chinese counties from 2010 to 2020, this study examined the impact of ecological transfer payment scale on economic development, public services, and ecological environment and identified the strategic choices of local governments based on their own factor endowments and development concepts. The results showed that: ① As an incentive policy, transfer payments in national key ecological functional areas had the effect of improving economic development, public service levels, and environmental quality. However, it had no significant impact on improving ecological resources. This conclusion remained robust after undergoing a series of stability tests. ② With the growing population and rapid urbanization in the eastern region, the scale of transfer payments demonstrated a more pronounced effect on economic development and public service provision in the east compared to the central and western regions. However, its impact on enhancing environmental quality was weaker in the east than that in the central and western regions. In addition, the higher the scale of ecological transfer payments, the stronger the effect on improving the ecological environment and enhancing economic development. ③ In regions with significant fiscal gaps and sluggish industrial development, local governments were more motivated to expedite their economic growth. Consequently, ecological transfer payments were often directed towards economic development or public infrastructure projects. In highly industrialized areas, the magnitude of transfer payments played a more pronounced role in enhancing environmental quality. However, when the benefits accrued from ecological protection failed to offset the costs associated with economic development, this could induce local governments to 'reverse incentives' for ecological transfer payments, leading to a situation where ecological environment governance was ineffective. [ABSTRACT FROM AUTHOR]