In order to solve the problem of the reasonable definition of real options in PPP projects of urban water supply, the features of the options are analyzed according to the basic theory of real options. The binary tree option pricing model is used to make a price for the implicit option of the projects. The fuzzy comprehensive evaluation method is used to improve the value of the compound options of PPP projects, and an evaluation model for the value of urban water supply projects is established. Therefore, the traditional evaluation methods for urban water supply projects are improved. Through case studies, it is validated that the real option method is helpful to reasonably define the uncertain value of PPP projects of water supply, and it further reflects the real value of the projects so as to provide more effective decision-making for the investors.