DEM (Digital Elevation Model) is one of the primary data source for watershed analysis, provides wealthy information of geological features, hydrology and others. The author introduced the method to extract hydrological features by DEM data, including depression filling, flow direction, flow accumulation, flow length and hydrology analysis. Flow direction was determined by the D8 algorithm which was provided by hydrology module in ArcGIS software. Through the calculation of flow accumulation and settings threshold, the hydrological features of Dongjiang Lake were extracted. The results showed that, the maximum flow length of study area was 113651 m; there was a certain degree of soil erosion, which in some areas was more serious. The watershed digital drainage simulated by the algorithm was consistent with the topographic data provided by the water resource department, which reflected the spatial distribution for the rivers in study area and provided basic data for further study of vegetation ecology environment change in drainage area of Dongjiang Lake.