A state-space model is presented for analysing and formulating groundwater system in this paper.From several models of groundwater system, such as ideal analytical model, numerical model, statistical model, response function model, and based on the principle of water balance and Darcy's Law, a general dynamic equation of groundwater system is deduced and established. Physical and test approaches are summarized as two main identification means of groundwater system and their advantages are analysed respectively.Taking 3 groundwater sites in Taiyuan, Shannxi province as an example, the model parameters of the groundwater system have been identified with long-series observed data of input and output.