The Heishan geothermal area is located at southern area of the gigantic rock body of the Lincang Granite in western Yunnan, where the groundwater system and geothermal fluids are mainly distributed along the Heishan-Hejian fault with exposed temperatures ranging from 85 °C to 99 °C and an average geothermal gradient exceeding 49 km/ °C, showing a high potentiality for power generation. In order to understand its origin and distribution characteristics and to identify favorable drilling targets for further exploration and development, this study conducted analyses and characterizations of the ground water system, thermal structures, and heat storage fracture network through using the improved fracture seismic method. The results indicate that the distribution of vertical fracture network of Heishan geothermal area is mainly controlled by a set of secondary northeast trending faults, which govern the hydraulic circulation in the geothermal area together with the northwest-southeast trending main structures. Horizontally, the well-connected fracture network is predominantly distributed at depths ranging from 1500 to 2000 m, exhibiting a trend of thermal convergence from northwest to southeast. Therefore, the southern part of the Heishan geothermal area, particularly the high energy intensity zone at depths of 2000 to 2500 m, represents a favorable drilling targets. Furthermore, this underground fracture characterization method can be also applied to improve the success rate of directional reservoir transformation of enhanced geothermal system (EGS) and effectively monitor it.