This paper is based on the historical and current situation of rural socio-economic development of a provincial lake area. At present, economic development of the lake area is considerably lag behind. Meanwhile, there exist rich natural resources and hidden unemployment of rural population. By describing the several facets of difficulty facing the lake area, the author addresses the issue of adjusting industry structure of the entire lake area, upon which the System Dynamics approach is employed in modeling and policy analysis.The System Dynamics Model of the lake area rural socio-economic development consists of 8 sub-models, which are farming, fishery, animal husbandry, rural industry, forestry and side- occupation, energy, water conservancy and population. By simulating and analysing, policy recommendations are set force.