Abstract: The effective commercial value of unconventional reservoirs can be expected when the fractured horizontal well technology is adopted. Aiming at the reservoirs with ultra-low permeability in the study area, the authors studied the regularity of fractured horizontal well during water-flooding development by numerical simulation, probed the percolation mechanism of fractured horizontal well during waterflooding development by streamline method. According to the form and distribution of streamline, its relationship with the fracture, together with the results of numerical simulation, the authors concluded the characteristics of four flow stages i.e. the linear flow near fracture, pseudo-radial flow near vertical fracture, linear flow in the formation, and the pseudo-radial flow in the horizontal well. The further analysis of flow mechanism of fractured horizontal well with different well patterns during waterflooding development was also conducted, which will provide practical technical guidance for the development in the future.