The numerical simulation of two-phase oil-water flows in a low permeability reservoir was carried out by means of an increment-dimension precise integration method (IDPIM). First of all, state equations denoted with pore fluid pressures at mesh nodes were built up according to finite difference method (FDM). Secondly, the recurrence formulae of the pore fluid pressures at mesh nodes were set up based on IDPIM. Finally, the numerical simulations of two-phase oil water seepages for a typical five point injection-production reservoir as an example were conducted by means of IDPIM and IMPES respectively. Calculation results by IDPIM are in good accordance with those by IMPES, and then IDPIM is quite reliable. At the same time, the effect rule of the startup pressure gradients on recovery degree, liquid production rate and oil production rate has been investigated. The start-up pressure gradients have an outstanding effect on recovery degree, liquid production rate and oil production rate, and the existence of the startup pressure gradients will enhance development difficulty and cost.