The purpose of this research is built the management system of source-water-quality-protection area. We suggest to divide conservation up two zone. The first zone is strong limit to any development, and development control mechanism in the second zone is development permission. We suggest land banking, easement, and development transfer three compensations for watershed conservation. After case study of Kao-Ping watershed, “easement” mechanism is the most workable one. If government use “easement” mechanism to compensate the landowner in source-water-quality-protection area, the total compensation is between 82 billion to 327 billion. The government can pay the rent to landowner by year to lower the payment. The payment can be charged from using tap water by 1 to 12 dollars per cubic meter. If the payment is charged from land taxes, the tax rate will be to rise up 33% to 65%. We suggest the three mechanisms to management the source-water-quality-protection area. First, the mechanism can be work under the “Drinking Water Management Act”. The second mechanism is worked out for changing the “Drinking Water Management Act, ” and put the articles about zoning, management, and compensation etc. The third mechanism is worked out for legislation the new law, and this new law can put all water resource management things together. All of the management mechanism and the boundaries of protection areas are base on the QUAL2E model and simulation and verification to water quality of Kao-Ping watershed.

watershed management,zoning,compensation