Abstract: The relationship between water resources utilization and oasis establishment in the Shulehe River Watershed is discussed in this paper. Surface runoff of the watershed mainly originates from the high mountain region of the Qilian Nountain. In order to make full use of potential of water, the overall watershed planning should be made and feasible measures should be taken such as coordinatring use of surface runoff and ground water, developing and utilizing water near the users, protecting the environment of down stream,area, raising the dam of Danghe Resevoir, transforming old oases and establishing new oases, expanding the forest lands and following the procedures of land development etc. so as to create an ecosystem environment of high efficient arrtificial irrigation oases in the Shulehe River Watershed.