In order to reveal the gas-water distribution and formation mechanism of the low-permeability sandstone gas reservoir, the gas reservoir distribution and the formation mechanism in a low-permeability sandstone gas reservoir are investigated using data obtained from a physical simulation experiment of gas percolation. The exploration and experimenting for petroleum in the upper Paleozoic gas pool of the Sulige gas field in the Ordos basin in this paper. Results showed that the gas reservoir is characterized by low gas saturation, a complex distribution relationship of gas-water, and weak gas-water gravity differentiation. The characteristics of gas distribution are closely related to permeability, gas flow, and migration force. The capillary pressure difference is the main driving force of gas accumulation. There exists a threshold pressure gradient as gas flows in low-permeability sandstone. The lower that permeability, the greater the threshold pressure gradient. When the driving force cannot overcome the threshold pressure (minimal resistance), the main means of gas migration is diffusion; when the driving force is between minimal and maximal resistance, gas migrates with non-Darcy flow; when the driving force is greater than maximal resistance, gas migrates with Darcy flow. The complex gas migration way leads to complicated gas-water distribution relationship. With the same driving force, gas saturation increases with the improvement of permeability, thus when permeability is greater than 0.15 × 10 −3 µ m 2 , gas saturation could be greater than 50%.