There are three kinds of water resources allocation model,government allocation,market allocation and quasi-market allocation.Within the process of institutional reformation of water rights,the institution of water resources allocation is changing from government allocation to market allocation.In neoinstitutional economics,transaction cost theory and theory of rent dissipation can offer gist for the design and choice of new water allocation system.Because of the different systems of the water rights allocation,there are various transaction costs,better institution will get more social net rent after deducting transaction costs.At the present,the most exigent task for Chinese water resources management is to define the public and private rights of water resources scientifically,and then to transit from complete control of government to market system.