Abstract: Problems of migration, ecology and benefits sharing become the most important constraints at the existing stage of China’s hydropower development after restrictions of technology, funds and market. It is necessary to build a benefit sharing system to consider reasonably all stakeholders' benefits during the life cycle of projects. This paper focuses on the output factors of hydropower projects in a benefit sharing system and the evaluation on the factors' positive externalities. Name generator is used to identify the system's output factors, which are divided into economic factors, social factors, ecological factors, etc. We analyzed the positive externalities of the factors by the externality theory, and obtained an externality analysis framework including grim benefit, disaster prevention benefit, navigation benefit, and greenhouse gas reduction. This framework has been applied to analysis of the Three Gorges project, and its results show that positive externalities exist in hydropower projects and should be fully considered in evaluation of the projects to achieve a reasonable benefit sharing system and a more effective transaction mechanism. The result lays a basis of benefit sharing system and is useful to harmonious development of hydropower resources in guiding practice and policy-making.