A one-dimensional (vertical) steady model is treated to investigate the occurrence of the subsurface two-phase flow system for the case of no net fluid transport; specially a close investigation is made for a fractured-type reservoir. When the heat flux lies between specific limits, the vapor-dominated two-phase flow system is possible (the primary condition), which is the similar result obtained by Schubert and Straus (1979). Even if the heat flux exceeds the upper limit of the primary condition, either the vapor-dominated or the water-dominated two-phase flow system is possible under permeabilities larger than a specific value (the secondary condition). In general, the primary condition provides for shallow (low temperature) systems, whereas the secondary condition provides for deep (high temperature) systems. It is also shown that occurrences of the two-phase flow system are classified into three types due to the magnitude of permeability. Based on permeability data, it is thought to be that the case of the large permeability is applicable to real systems. However, whether the deep high tem-perature part becomes the vapor-dominated or the water-dominated cannot be defined only by the thermodynamic condition, but may depend on other factors such as the hydrologic condition in the field.