The S&T activities, directed by the government, had once made essential contributions to the country's S&T structure construction and development. However, with the development of market economy, this highly concentrated and planned system was gradually revealed its deficiencies and disadvantages. After China adopted the reform and opening policy, the Chinese S&T system experienced operational improvements in such aspects like appropriation reform, technology market establishment, and industrialization of S&T achievements. The reform pushed the Chinese S&T striding forward and made the System economically oriented. But viewed as a whole, the S&T system has not been completely free from old fetters. There were problems left unsettled such as unreasonably allocated S&T resources, S&T activities being divorced from social and economic development. Because the developing country wants to realize the great scientist development, and protect some great science achievement to be important to our country economical development, the government also plays the essential role in science field. On some special strategy science field, the government needs also directly organize science research and technology innovation conduct. But the paper thinks that most nation-owned science research institution must go into the market. Only when they are in the market, they can improve the research level and match the research conduct with the market need. With the process of nation-owned science research institution's reform, the reform of science research system has entered into a key phrase. The aim of reform of science research system is to improve the innovation capability of our nation-owned science research institutions.The paper first analyses the effect of science system on economics development, and then review relevant literal view about science innovation theory, institution change theory, nation competitive advantage theory and so on. The paper thinks that we must reform the institution, which leads to high transition cost if the economy wants to keep high development rate. Secondly, the paper analyzes the process of Chinese science innovation system change, and the internal and external condition to push the Chinese nation-owned institution reform. The paper analyzes the proper right problem in the process of Chinese nation-owned institution reform, and concludes the object mode of Chinese nation-owned institution reform through international comparison research method. Thirdly, the paper demonstrates how to optimize corporation govern structure and financial structure of Chinese nation-owned institutions. Finally, based on the case study, the paper research on the nation-owned science research institution in war industry.The paper mainly takes the empirical and normative research method, combining with historical, comparative, and mathematical method. Under the background of Chinese S&T system reform, The paper analyzes all kinds of problems from the theory and practice, and concludes countermeasure and suggestion that the government and nation-owned research institution should take in the process of nation-owned science research institution reform.