River basin water rights system development is the key for regulating the water and sedimentation relationship in the Yellow River. This article, in accordance with the national water rights system development framework, reviews the development process of and analyzes problems and challenges faced by, and provides recommendations for improving the water rights system in the Yellow River Basin. As the model of modern water rights system development in China, driven by the problems, the Yellow River Basin has formulated water resources allocation plans, conducted water resources regulation, and explored water rights transfer and water rights clarification. But the system has not been completed and problems exist, including inflexible water use plan, no choice for users, no market for trading, and replacement of water extraction management by regulation, among others. More importantly, the system has been facing radical changes in socioeconomic development and in the ecological environment, as well as fundamental changes in water resources, use structure, and water-sedimentation relationship in the basin in the past 40 years. The article recommended to complete water rights clarification, establish eco-environment water rights, introduce water rights trading mechanism, shift management agency functions, and improve water resources management basis for the Yellow River Basin.