Abstract: This paper is focused on the project of water diversion from Yangtze River to Taihu basin (WDYRTB) which significantly improves water environment in Huzhou city and brings the region huge economic benefits.Firstly, water supply effects on industries and residents' living are analyzed by useing the partition coeff icient method.Then, a grey relat ion technique is adopted to show the relationship between water use and industrial development in Huzhou, which proves the rationality of partition coefficient method.The results indicate that the effect of WOYRTB on the economic efficiency of the tertiary industry of Huzhou city is the highest, while that on its industry is the lowest.