Abstract: Considering the first rising and then falling of the isotherm at high temperature and high pressure for deep shale gas reservoirs, the Langmuir isotherm was modified, and the mathematic model incorporating supercritical adsorption and nonlinear flow was developed for gas-water two-phase flow of fractured horizontal wells in deep shale gas reservoirs. Moreover, the developed model was solved in a finite element approach and then used to investigate the effects of the matrix permeability, the reconstruction zone area and main fracture permeability on the flow of gas and water. The research showed that a larger the reconstruction zone area is not always preferred—further expansion of the reconstruction zone area beyond a threshold brings about no considerable gain in production. Moreover, it is indicated that during the production, the fluids inside the main fracture first flow into the well, then the fluids in the reconstruction zone flow into the main fracture, and finally the matrix fluids recharge the reconstruction zone. Therefore, early production is mostly affected by the main fracture permeability, and late production is dominated by matrix permeability. The findings of this research provide guidance for the recovery of deep shale gas.