Forest transition theory posits that socioeconomic development in a country or region may cause its forestland to shift from net loss to net gain. However, forest transition may also occur under various policies, resulting in forest gains in some regions but deforestation in other regions. We used the telecoupling framework to address this crucially important issue that has rarely been examined. Using time series satellite images and statistical yearbook data from 2000 to 2020, this study seeks to understand land use change patterns, the corresponding regional spillover effects, and driving forces behind such patterns in Zhejiang Province, China. The results show that large-scale continuous deforestation has taken place since 2000, causing a total loss of forestland by 186,014 ha. In parallel with this forest loss and a slight decrease in arable land, urban construction land has soared by 169.45%. We found that developed municipalities such as Hangzhou witnessed increases in urban land at the expense of large-scale deforestation in underdeveloped municipalities such as Lishui. We believe that this cross-region land change pattern may arise from the Balance of Arable Land System (BALS) policy that seeks to achieve a goal of no net loss of cropland. Whatever land use policy—such as the BALS policy—must strike a good balance between competitive land uses that have different objectives such as residents’ living, ecology, and production. In addition to enriching the forest transition theory, this study provides a solid basis for future land use decisions in developing regions or countries.