The construction of water rights trading is an important water resource management measure to improve the scarcity of water resources and enhance the efficiency of water resource utilization. Exploring the modernization of water rights trading mechanisms from the perspective of green finance and promoting the deepening application of green finance in the water field is a new approach to solve the problems of water rights trading. Based on the current development status and characteristics of green finance, this paper analyzes the current situation and problems of water rights trading in China; based on the problems, we will construct the conception of green finance supporting the modernization of water rights trading mechanisms, including mechanism of action, system design, and implementation path. This conception is supported by three mechanisms including financial support, technological innovation, and strict supervision. It designs a project operation system, and explore four paths to implement green finance to support water rights trading including strengthening top-level design, expanding financing channels, assisting market construction and strengthening risk control supervision. The results of research indicate that there are problems in China's water rights trading construction currently, such as incomplete top-level design, difficulty in project financing, incomplete market mechanisms and lax supervision. The functional advantages of green finance are needed to assist in solving the difficulties in the development of water rights trading.In detail, green finance alleviates the situation of the difficulties in financing, imperfect market construction and weak supervision through funding support channels, technological innovation channels and strict supervision channels.