Paste composite filling mining (PCFM) is one of the effective ways to achieve water-preserved mining (preservation of the waterproof strata). To investigate the laws of fracture propagation of the overlying strata in the PCFM stope, a kinematic model of overlying strata in the PCFM was established, which identified the major determinants to the development of overlying strata fractures. Taking the 112,201 working face of the test mine as the research background, the physical similar simulation, numerical computation, and theoretical analysis were combined to analyze the development characteristics of overlying strata fractures in the PCFM under the reaction between many factors (mining height, filling ratio, burial depth). The results show that the larger the mining height of the working face, the larger the development degree of overlying strata fractures. When the mining height is smaller, fractures are mostly distributed on both sides of the coal wall; when the mining height is larger, overlying strata fractures are mostly distributed on both sides of the coal wall and the upper part of overlying strata. The larger the paste filling ratio of the working face, the smaller the development degree of overlying strata fractures. Overlying strata fractures are mostly distributed in overlying strata on both sides of the coal wall. When the filling ratio of the working face increases, it is possible to effectively control the development of overlying strata fractures. The shallower the burial depth of the working face is, the faster the fractures are developed. With the increase of the burial depth, the development of overlying strata fractures is reduced, and overlying strata fractures will finally tend to be a stable value. The research results provide an important theoretical foundation for the application of the localized paste filling mining technique in the water-preserved mining, and also complement the theories of filling mining.