Abstract: Based on the numerical simulation method for two-phase flow, the two-dimensional and two-phase model for matrix-fracture system is estublished. It can be used to calculate the variation of productivity and water content before and after fracturing. This model considers the effects of wall damage, fracture face damage, variation of fracture conductivity with position and time, heterogeneity and anisotropism, elastic expansion energy on production performance of fractured well. According to this model, a set of application software for predicting production performance of fractured well has been developed. Practical application results show that this model and software can be used topredict preduction perfomance and stimulation effectiveness,and to optimize the hydraulic fracturing design.