In order to study the shrinkage of the Lake Hulun, monthly water balance model was used to analyze the characteristics and causes of water changes. Based on available continuous lake level monitoring data from 1963 to 1980, there are exchange between groundwater of surrounding areas and lake water according to the principle of water balance and other auxiliary calculations. The exchange has a certain regularity, which is the accumulated snow of the period from November to March when snows begin to melt and then infiltrate the soil with the increase of temperature. This part of water recharges the lake in the form of subsurface flow in spring, which causes the lake water level increases slightly. The lake will recharge the surrounding prairie through strong evaporation after July. On the basis of above observations, the unknown items, i. e. the exchange and overland flow, were taken into balance equation as a constant to simulate water level. There is high goodness of fit between simulated values and related research results. Finally, the influence of precipitation, runoff and evaporation under different climate scenarios on lake water level were used to determine the cause of the drastic decrease of the lake level. The results show that decline of the lake water level after 2000 is mainly due to the sharp drop of river runoff.