Azimuth waterjet propulsion system can broaden the navigation range of the ship, enhance the adaptability of ships in the shallow water area and other complex environments, and improve the mobility of the ship, which has a wide range of application prospects. In this paper, the numerical simulation was applied to investigate internal flow of azimuth waterjet propulsion system, the accuracy of numerical simulation was validated by experiment. The thrust and efficiency at different speeds were compared, the entropy generation rate is introduced to evaluate the loss ratio of different hydraulic component, the internal flow fields of azimuth waterjet propulsion system were analyzed in detail to reveal the flow mechanism caused by the variation of speed, which will provide guidance for the optimization design of azimuth waterjet propulsion system.