A distributed hydrological model that simulates water, nutrients and organic matter flow in a watershed including a paddy field area was developed to analyse the effects of paddy farming on water environment. The model considered biochemical reactions, by simplifying them to be of 1st kinetics, in ponding water in a paddy field and in water in a river. This model enabled estimates to be made of the contributions of paddy agriculture, irrigation water intake, domestic sewage and rainfall to the amount of nutrients discharged as a result of each land use. The model was applied to the basin of the highly eutrophicated Lake Aburaga-fuchi. The calculated values agreed well with the observed data. The calculated results indicate that river water quality was improved by irrigation water intake and paddy farming, and that nitrogen removal in paddy fields plays an important role in watershed nutrient circulation.