This paper is aimed at formulating a dynamic simulation model for the overall development planning in Hsinchu area using system dynamics approach and understanding the system behavior under various policy changes. These results will assist the development of a long-term plan for the study area. This model considers the interrelation of 5 subsystems, which are: (1) population sector, (2) employees sector, (3) production sector, (4) transportation sector and (5) land sector. Through careful one-to-one-variables-relation identification, the model is built and the actual data are fed into this model, which is then run on a CDC-cyber 720 computer for simulation. Following the present policy-do-nothing-approach, the output shows that by 2000 the natural growth rte will be too high; population emigration will continue; the indices of average income per person & average road usage per vehicle will be far from expectation. For this reason, four new development policy alternatives are formed: They include: (1) increase of-social expenditures, (2) total development of industry, (3) total development of transportation, (4) development of economic resources. These alternatives are tested on the model. The results show that the combined policy of above alternatives will be most desired for the long-term development. Again, it is proved that the system dynamics approach is a powerful methodology in the regional planning.