After the Changqing oilfield's low permeability reservoir entered the middle to high water cut stage, the flow characteristic became complex, and the modern production decline analysis model based on single-phase flow has large error in parameter interpretation, making it impossible to provide precise guidance for reservoir development. In this paper, based on the principle of flow mechanics, an oil-water two-phase transient production decline analysis model for fractured wells in low permeability reservoirs was developed. This model was solved by using the point source function, Laplace transform and Stehfest numerical inversion. Type curves controlled by model parameters for well test analysis were used for flow stage identification and curve sensitivity analysis were conducted. The research results show that the analysis curves of transient production decline in oil-water two-phase of fracturing well reflects five main flow stages, and the curve position is higher than the single-phase flow production decline curve. The water cut of the matrix mainly affects the curve traits of the bilinear flow stage, the formation linear flow stage, transitional flow stage and overall radial flow stage. The water cut of the fracture mainly affects the curve traits of the bilinear flow stage. When both the values of matrix water cut and fracture water cut are zero, an oil-water two-phase transient production decline analysis model can degenerate into the single-phase model. The reservoir and fracture parameters were obtained through the combination of field well interpretation and analysis, and the results were consistent with the actual production. The research results have guiding significance for the dynamic analysis of oil-water two-phase flow parameters in low-permeability reservoirs.