The invention discloses an indoor phreatic zone local ground water generation circulating system and an operation method. The system comprises a water tank, wherein the water tank is connected with a water supply system; a water inlet and a water outlet are formed in the water tank; a circulating water pipe is connected with the water inlet and the water outlet; a first glass rotameter, a first water shut-off valve and a first centrifugal pump are sequentially arranged on the circulating water pipe; an organic glass plate with holes is arranged on the bottom surface, between the water inlet and the water outlet, of the water tank; a filter screen is arranged on the organic glass plate with the holes; sands are paved on the filter screen; a water pipe is arranged on the bottom surface of the water tank and is connected with a first water tank; a second water shut-off valve, a second glass rotameter and a first peristaltic pump are sequentially arranged on the water pipe. The indoor phreatic zone local ground water generation circulating system provided by the invention simulates various complex interactions between overlying water in a natural river and underground water, utilizes an ingenious physical principle, and is simple to operate, low in cost, stable in performance, and convenient to use.