This paper introduces the method of designation of water storage capacity for each grid cell within a catchment, which considers topography, vegetation and soil synthetically. For the purpose of hydrological process simulation in semi-arid regions, a spatially varying storage capacity (VSC) model was developed based on the spatial distribution of water storage capacity and the vertical hybrid runoff mechanism. To verify the applicability of the VSC model, both the VSC model and a hybrid runoff model were used to simulate daily runoff processes in the catchment upstream of the Dianzi hydrological station from 1973 to 1979. The results showed that the annual average Nash-Sutcliffe coefficient was 0.80 for the VSC model, and only 0.67 for the hybrid runoff model. The higher annual average Nash-Sutcliffe coefficient of the VSC model means that this hydrological model can better simulate daily runoff processes in semi-arid regions. Furthermore, as a distributed hydrological model, the VSC model can be applied in regional water resource management.