Abstract: In this paper, situation theory, a new theory about semantic analysis, is systematically introduced, extended and developed. Based on the theory a model of natural language understanding is built, which is suited for the features of Chinese understanding. A formal expression for the situationmeaning of all kinds of Chinese words and sentences, i. e., situation-frames, is derived and a relationcalculus system for finding out the semantic meanings of the situation-frames is constructed. The semantic analysis and pragmatic analysis are well combined by putting the pragmatic constrains in the situation-frames, and unified in a uniform internal expression.