Eutrophication in lakes and reservoirs is a serious environmental problem that has damaged ecosystem health worldwide. Water diversion is one of the most popular methods for improving the water quality in shallow lakes, as it dilutes pollutants in and diverts them out of the lake. However, simple diversion without rational water distribution cannot significantly enhance water exchange in the entire lake because dead water zones always exist. This paper illustrates a case study on water quality improvement in Xihu Lake by diversion and water distribution. Based on theoretical calculation, the diversion water discharge was determined and rationally distributed into four different locations. According to the field observations after the implementation of the diversion and water distribution project, the average velocity over the dead water zones increased approximately 50 times over that of prior to the project. The average water exchange period reduced from 68 days to 22.5 days. The average turbidity was 8.8% and 12.4% lower than before after two and four months of diversion, respectively. The maximum turbidity reduced from the original 27.5 NTU (Nephelometric Turbidity Unit) to 20.1 NTU after two months of diversion, then to 16.1 NTU after four months of diversion. It shows that this diversion and rational water distribution eliminates most of the dead water zones and achieves a favorable flow field, thus reducing the turbidity and increasing water transparency, which is conducive to the improvement of water quality.