Located in reservoir area of Dahuaqiao Hydropower Station in Lancang River, the Dahua ancient deposit landslide exhibits high possibility of reactivation due to reservoir impoundment. In this study, physical model tests are conducted to investigate the variations of groundwater, deformation, and failure process of the landslide under different fluctuation speeds of reservoir water level. Influence of groundwater on landslide stability when reservoir water level fluctuating is analyzed then. Results indicate that the seepage pressure caused by water level difference can increase landslide displacement. During the dropping process of reservoir water level, the relationship between landslide displacement and water level difference can be described by a power function model. Groundwater has negative effects on stability of landslides, and the damage is characterized by traction landslide. More attentions should be paid on the displacement of the front edge of the landslide during the first rise and drop of reservoir water level. The study provides indispensable information for scheduling reservoir water level in the Dahuaqiao and others similar reservoir areas, thus having vital importance.