Abstract: This paper built a two-stage yardstick competition model of sewage treatment sector by introducing profit rate and quality coefficient into models put forward by Shleifer and Bogetoft. It used Data Envelopment Analysis method to determine a yardstick price of sewage treatment sectorto promote the competition among sewage treatment enterprises.Taking Zhejiang province as an example ,this paper used clustering analysis method to correct heterogeneity of firms, classified sewage processing enterprises,calculated the price of some typical sewage treatment enterprises in Zhejiang.And all of these provide some academic references for implementing the incentive price regulation .