The implementation of Diagnosis Related Group System (DRGs) in the medical insurance payment system was approved of great importance to control the irrational increase of medical expenses nationally. Based on the introduction of the DRGs’ application in the medical insurance system and referred to the international experience, the article analyzed the establishment of Chinese DRGs, and put forward some suggestions on the application of DRGs in the medical insurance payment system, namely normalizing the diagnosis’ name and code, establishing clinical guidelines, setting up a DRGs cost account system and completing the medical quality supervision mechanism.