Abstract: The water retaining structure of the Zhaixiangkou Hydropower Plant was a dam of special type, which consisted of a concrete arch dam founded on a arch bridge across the river, and a diaphragm wall down into the gravel deposit containing peat layers. The stability of the diaphragm wall against the pressure of reservoir water depended largely upon the shear strength of the peat.This paper presents the formation of the peat layers and their geotechnical properties measured. For ensuring the stability of diaphragm wall, method of increasing the shear strength of peat as well as various engineering measures are discussed. The plant has performed satisfactorily for fifteen years.