‘One Dam by One Pond’ water source project was developed by Dongsheng office of World Bank project on soil and water conservation, which was one of the optimum modes to solve the water source problem in the arid hilly and gully region where the water is scarce. Its establishing condition, feature, design principle, design procedure and forms were described with respect to the physical environment in Dongsheng city. It is a typical example and could result in significant economic benefit. Therefore, it deserves to be widely extended.