Traditional optimal operation of hydropower station usually has two problems. One is that the optimal algorithm hasn’t high efficiency, and the other is that the optimal operation model pays little attention to ecology. And with the development of electric power market, the generated benefit is concerned instead of generated energy. Based on the analysis of time-varying electricity price policy, an optimal operation model of hydropower station reservoir with ecology consideration is established. The model takes the maximum annual power generation benefit, the maximum output of the minimal output stage in the year and the minimum shortage of eco-environment demand as the objectives, and reservoir water quantity balance, reservoir storage capacity, reservoir discharge flow and hydropower station output and nonnegative variable as the constraints. To solve the optimal model, a chaotic optimization genetic algorithm which combines the ergodicity of chaos and the inversion property of genetic algorithm is exploited. An example is given, which shows that the proposed model and algorithm are scientific and feasible to deal with the optimal operation of hydropower station.