Relative stability of dam system and its layout planning optimization are currently a hot area of the dam construction in small watershed.In this paper,the present situation of research and application about relative stability of dam system and its optimization design are reviewed at first.Optimization models of dam layout and construction timing are then established for the optimizations of intercepting sediment reservoir capacity,flood detention reservoir capacity,and design of spillway discharge by the principles of system dynamics,empirical method,dynamic simulation method,and non-linear programming method.Moreover,a computer flow chart of automatic optimization is presented.The optimization models of dam system are verified in Jiuyuangou watershed in the loess hilly area and desirable results are achieved.The study has a valuable reference for watershed dam construction in the similar areas of the loess hilly and gully area.