Abstract: As a vital part of external environment, the regional soft environment exerts considerable effects on Small and Medium-sized Enterprises(SMEs’) competitive advantage. Based on the cross-section data of 170 SMEs from seven administrative regions of prefecture and city levels in Zhejiang province, a theoretical model of regional soft environment as a functional element on SMEs’ competitive advantage is established through EFA, CFA, and SEM. The specific functionality of six elements in the regional soft environment on SMEs’ competitive advantage is systematically analyzed. The strategies based on the regional soft environment for SMEs getting competitive advantage are put forward at perspectives of both government and enterprises.