Toson-Uul Oilfield belongs to complicated faulted basin. Chagan Formation oil layer is tuffaceous reservoir under the depositional settings of nearshore subaqueous fan. Reservoirs have some characteristics of fractured structure, instability reservoir, complicated lithology, poor physical property and many types of reservoirs. This paper analyzes the main controlling factors of oil and water distribution using reservoir descriptions and based on the research of oil and water distribution law. The study suggests that the fault, the plane of unconformity and sand body can supply a good passage for oil and gas migration, and the structure and fault play a critical role in oil accumulation and hydrocarbon distribution. Sedimentary facies can control the plane and vertical distribution of oil and gas and the development degree of oil layer. Reservoir physical property dominates the oil and gas reserves and productivity directly. The research on the main controlling factors of oil and water distribution can provide the reliable basis for geology project drawing up and can provide guiding for knowing the distribution law of oil and water in similar oilfield.