This study aims to study the changes of vegetation coverage, community composition of woody plant and community α diversity in the closed small watershed of the Loess Plateau in western Shanxi Province of northern China, and to provide the theoretical basis and technical support for the restoration and construction of the simulated natural vegetation in the Loess Plateau. In the period from July to August in 2016, the closed small watershed in Caijiachuan Catchment of Jixian County in western Shanxi Province was investigated. The survey method of sample line and the sample were used to study the vegetation status of six different habitats, i.e. sunny slope, semi-sunny slope, shady slope, semi-shady slope, hilltop, and ditch sole, and the survey data was compared with the same habitats in 1996 (closed for 15 years), 2007 (closed for 26 years) in the Liugou Watershed. In July to August of 2016, this paper also study the dynamic changes of vegetation coverage, community composition of woody plant and community α diversity with the extension of time to close small watershed. The results indicated that: 1) When the small watershed was closed for 15, 26 and 35 years, the overall coverage reached 77.5%, 89.1% and 93.6%, respectively. And the small watershed has formed forest vegetation after being closed for 26 years. The small watershed has been basically closed and the habitat restoration has been better when closed for 35 years. The annual growth rate of the overall coverage rate slowed down after 26 years of closing. And the annual growth rates of coverage of the sunny slope and the hilltop were both slowed down, and that of semi-shady slope and shady slope was still increasing. 2) After the watershed being closed for 35 years, the semi-sunny slope, semi-shady slope, hilltop were inherited from the shrub xerophyte community to the tree and shrub mesophyte community. The sunny slope was inherited from the tree and shrub xerophyte community to the tree and shrub mesophyte community. The shady slope was inherited from the shade loving tree and shrub mesophyte community to the tree and shrub mesophyte community. Ditch sole was inherited from the tree and shrub xerophyte community to the shrub mesophyte community and the tree and shrub hygrophyte community. 3) After the small watershed being closed for 35 years, the species diversity of the habitats showed a single peak change except the sunny slope. Except the sunny slope, the uniformity index of the habitats gradually increased, the ecological dominance and species richness showed a fluctuating change. At present, the habitat community is in the middle stage of succession, the species distribution is more uniform and the structure is more stable. In conclusion, closed forest in the western Shanxi Province is the best way to form the sustainable forest vegetation.