To date, no unified and acknowledged definition or well-developed evaluation index system of groundwater environment capacity can be found in the academia at home or abroad. The article explores the meaning of water environment capacity, and analyzes the environmental effects caused by the exploitation of groundwater resources. This research defines groundwater environmental capacity as a critical value in terms of time and space, according to which the groundwater system responds to the external influences within certain goal constraint. On the basis of observing the principles of being scientific, dominant, measurable, and applicable, six level 1 evaluation indexes and 11 constraint factors are established. Taking Jinan spring region for a case study, this research will adopt groundwater level and spring flow as constraint factors, and the allowable groundwater yield as the critical value of groundwater environmental capacity, prove the dynamic changeability and its indicating function of groundwater environmental capacity through calculation, and finally point out the development trends of researches on groundwater environmental capacity.