Alveolar echinococcosis (AE) is a life-threatening disease in humans caused by the larval stage of Echinococcus multilocularis. The tapeworm is transmitted between small mammals and dogs/foxes in the Northern Hemisphere. In this study 286 AE cases were reported from eight counties and one city in Yili Prefecture, Xinjiang Autonomous Region, the People's Republic of China from 1989 to 2015 with an annual incidence (AI) of 0.41/100,000. Among the patients, 73.08% were diagnosed in the last 11 years. Four counties in the high mountainous areas showed higher AI (0.51-1.22 cases/100,000 residents) than the four counties in low level areas (0.19-0.29/100,000 residents). The AI of AE in Mongolian (2.06/100,000 residents) and Kazak (0.93/100,000 residents) ethnic groups was higher than the incidence in other ethnic groups indicating sheep-farming is a risk for infection given this activity is mainly practiced by these two groups in the prefecture. A total of 1411 small mammals were captured with 9.14% infected with E. multilocularis metacestodes. Microtus obscurus was the dominant species in the mountain pasture areas with 15.01% of the voles infected, whereas Mus musculus and Apodemus sylvaticus were the dominant small mammals in the low altitude areas. Only 0.40% of A. sylvaticus were infected with E. multilocularis. PCR amplification and sequencing analysis of the mitochondrial cox1 gene showed that E. multilocularis DNA sequences from the small mammals were identical to isolates of local human AE cases. The overall results show that Yili Prefecture is a highly endemic area for AE and that the high-altitude pasture areas favorable for M. obscurus may play an important role in its transmission in this region.