Abstract: The peanut compound system is an important farming system to develop the comprehensive utilization of water resources in the low hilly red soil region. It is worth of analysis in different periods of water dynamics, water balance and the utilization processes. The soil moisture at surface was measured by the advanced tensiometer for the maximum range of 15 bar. The data of soil moisture, runoff and precipitation in the fields were collected by position-fixed method during peanut growing season from 2001 to 2003. The influence of peanut compound system on soil moisture, rainfall and water balance component was analyzed. The results showed that there was no obvious difference between the soil water potential at 10 cm and 60 cm depth of peanut fields and intercropped fields during the rainy season，and it was affected by the rainfall intensity. The water potential at 10 cm depth of the peanut fields decreased to the lowest value of -344.0 kPa, while it was -50.6 kPa in the intercropped fields. The value of peanut fields was also lower than that of the intercropped fields during the dry season at 60 cm depth. The compound system reduced soil surface evaporation during the dry season. The 3-year dynamic of soil moisture was divided into three stages, which were water surplus period, water consuming period and water stability period. The intercropping system had stronger water consumption during the dry season. The soil water storage reduced 108.8 mm in July 2001, 111.7 mm in August 2002, and 105.5 mm in July 2003, respectively. The drainage and soil water storage change in the peanut compound system was 62.2 mm and 41.8 mm lower than that of the sole peanut field, respectively. There was no remarkable competition for water utilization between citrus and peanut during dry season. The peanut compound system had obvious surface water holding function and ecological effect.