The water diversion implemented in Lake Taihu basin has improved the carrying capacity of water resource and water environment, and expressed the comprehensive benefit of hydraulic engineering to the improvement of water environment. It supported the sustainable development of social economy in Lake Taihu basin. Based on the trend analyses of intake and input water quantity in Wangyu River, and the water quality when the input water running through the Lake Taihu in recent years, this paper compares the total phosphorus and total nitrogen concentrations of input water with that of Gonghu Bay, Meiliang Bay, west lake bay and other main input rivers during the period when Yangtze-Taihu water diversion began since 2007. By analyzing the attenuation trends of the total phosphorus and total dissoluble phosphorus concentrations during water diversion period based on the monitoring results, it is illustrated that the Yangtze River had high quality water, and Yangtze-Taihu water diversion has played a positive role in increasing the capacity of water environment and improving the water environment of Lake Taihu.