In this paper, an extended traffic flow model on a single-lane gradient highway is proposed with the consideration of the relative velocity. The stability condition is obtained by the use of linear stability analysis. It is shown that the stability of traffic flow on the gradient varies with the slope and the coefficient of the relative velocity: when the slope is constant, the stable regions increase with the increase of the coefficient of the relative velocity; when the coefficient of the relative velocity is constant, the stable regions increase with the decrease of the slope in downhill and increase with the increase of the slope in uphill. The Burgers, Korteweg-de Vries, and modified Korteweg-de Vries equations are derived to describe the triangular shock waves, soliton waves, and kink-antikink waves in the stable, metastable, and unstable region, respectively. The numerical simulation shows a good agreement with the analytical result, which shows that the traffic congestion can be suppressed by introducing the relative velocity.