The dynamic relationship between the water infrastructure investment and the urbanization rate is established by using the VAR model, and the correlation and influence mechanism are analyzed. The Granger causality analysis shows that the water infrastructure investment is the Granger cause for change of the urbanization rate. VAR(4)model indicates that the index system composed of the water infrastructure investment and the urbanization rate is of long-term stability. Through the analysis of pulse responses and variance decomposition, the investment in the water infrastructure will accelerate the urbanization process in China in the long term. However, the influence will be slightly different during the construction period and operation period of water infrastructure.