Ecologically sensitive suburban areas provide important ecosystem services and protect urban ecological security because of their multiple functions in natural and human systems. The research on the ecological environment effects of land use activities in ecologically sensitive suburban areas is important in guiding the healthy and sustainable development of cities. Taking the west suburbs of Hangzhou in China as a case study, we quantified land use changes from Landsat satellite imagery and calculated the value of ecosystem services using the well-established equivalent factor table for land use/cover change (LUCC) and ecosystem services value (ESV). The impacts of LUCC on the ecological environment were analyzed using the transfer matrix of land use and coefficient of elasticity. Results revealed the following. (1) The total ESV in the western suburban area of Hangzhou decreased from $109.95 million in 2000 to $87.09 million in 2016. Moreover, the ESV of gas regulation, climate regulation, soil formation and protection, as well as biodiversity conservation presented a large decrease of more than 25%, especially between 2010 and 2016. (2) The spatial distribution of ESV was high in the west and low in the east. The regions with a significant reduction in ESV were mainly distributed in the eastern town of Wuchang and in Jincheng Town located in the midwest valley. (3) Industrial agglomeration activities in the ecologically sensitive suburban area emerged as the primary factor influencing ESV for various land uses. The elasticity indicator for assessing the responses to ESV changes relative to LUCC showed that 1% of the land conversion in this area resulted in average changes in ESV of 4.1% after the establishment of the industrial agglomeration area. (4) The increase in construction land was associated with a significant decrease in forest area because of the policy of cultivated land requisition–compensation balance and development strategies for low-slope hilly lands. Consequently, the ESV in the ecologically sensitive suburban areas rapidly declined.