Scientific water resource management policies must account for multiple uncertainties, including natural inflows, socio-economic development, and ecological water demands. However, traditional approaches to water resource management policy formulation often fail to capture the complex dynamic feedback inherent in water systems, thereby reducing the foresight and scientific robustness of policy decisions. Policy simulation technology, as a quantitative tool capable of representing complex system behaviors and conducting scenario analysis, provides a new analytical approach for water resource management policy formulation. Nevertheless, further development is needed in cross-system modeling that couples water resources systems with economic-social systems. This study systematically reviews the development and major methodological approaches of policy simulation technology, including the computable general equilibrium model, system dynamics model, and agent-based model. It further analyzes its applications and limitations in the formulation of water resources management policies, and proposes a theoretical framework for water resources management policy simulation model by coupling professional hydrological models with policy simulation models. It further elaborates the specific application paths of policy simulation technology in the formulation of water resources management policies under the background of national water network construction and the principle of “Water Dominates Development”, providing a basis for developing region-specific and category-based precision control strategies.