Under the background of global change and the rapid development of economy, the Yangtze River basin is confronted with rising pressure to prevent flood. The identification of inundation risks and the evaluation of potential flood losses are of great significance in the Yangtze river basin. This study performs the identification of the inundation risk in Honghu flood diversion area with a hydrological-hydraulic model based on raster data integrated into Arcview3.x. It processes an evaluation of the potential loss in terms of land use types and damage functions, and finally builds an dynamic database of potential loss which can serve as scientific base for the management of Honghu flood diversion area. Tlie identification of inundation risks is carried out based on a digital elevation model, calibrated with the waterstage-time curve derived from the summer flood in 1998 and manning roughness of each land use type.