Based on the theory of system dynamics, the paper used system dynamics software (Vensim) to construct system dynamics model (SD model) for sewage reuse of Xi''an, and selected the main variable factors such as population, GDP, gross industrial output value etc. for simulation analysis combined with GM (1,1) model, made the simulation analysis prediction of sewage reuse with different development schemes. The result shows that guarantee in 2020the sewage secondary treatments rate of development plan will reach 90%, recycle and reuse rate reach 45% so as to alleviate the urban water shortage effectively, improve the urban water environment gradually, and achieve a coordinated development of economy and environment.