Fluctuations in reservoir water levels have a significant impact on the seepage and slope stability of earth dams. The varying rate of the water level and soil–water characteristic curve (SWCC) hysteresis are the main factors affecting the seepage and the stability of dam slopes; however, they are not adequately considered in engineering practices. In this study, the SEEP/W module and the SLOPE/W module of Geo-studio were employed to analyze the seepage features and the stability of downstream slopes, taking into account the water level fluctuation rate and the SWCC hysteresis. The results reveal that the pore water pressure of the representative point forms a hysteresis loop when the water level fluctuates, which becomes smaller as the water level variation rate increases. Within the loop, the pore water pressure with a rising water level is greater than the value when the water level is dropping, and the desorption SWCC derives greater pore water pressures than the adsorption SWCC. Similarly, the safety factor (Fs) curves under the condition of water level fluctuations also form a hysteresis loop, which becomes smaller as the variation rate of the water level increases. When the water level fluctuation rate increases to 4 m/d, the two curves are tangent, meaning that the Fs with a rising water level is always greater than the value when the water level is dropping. The desorption SWCC derives a lower Fs value than the adsorption SWCC as the water level draws up, but this initiates no evident difference in the Fs value when the water level draws down. These findings can be used to inform the design and operation of earth dams under fluctuating water levels.