Aiming at the problem that optimal dispatch of cascade hydropower plants has the characteristics of highly nonlinear and complicated constrain conditions, this paper presents nested searching algorithm based on fractal and chaos theory. This algorithm uses nested structure to combine the properties of ergodicity, universality, random and regularity of fractal division interpolation algorithm and chaotic optimization algorithm. The results of a practical example prove its validity and practicability when applied in energy saving dispatch of Nanyahe cascade hydropower plants. Furthermore, the results show that the nested algorithm not only has many advantages such as strong ergodicity, simplified parameter configuration, high stability, global optimization, and easy to program, but also can get consistent convergence accuracy and lesser computing time compared with POA algorithm.