Based on the heating method included in the temperature tracer method, a new monitoring system characterized by combinations of FBG sensors and the water cycling heating system is presented to apply on the leakage monitoring of rock-fill dam, aiming to overcome the disadvantages of conventional means such as spatial discontinuity and execution inefficiency. The main structure of this novel system is designed by embedding the FBG sensors in the pipes of the water cycling heating system. Several major components of this system including boiler, sub-water catcher, heating pipeline, and FBG temperature sensors can play the functions of heating, allocation, transporting and monitoring, respectively. The temperature of heated water along the pipeline can be measured by embedded FBG. Based on the operational principle of this monitoring system, a series of experiments that take the influence factor of leakage passage (location and amount) and leakage intensity into account are performed for simulating the concentrated leakage monitoring. A cooling curve can be derived from the measured temperature data using Newton’s Law of cooling. The testing results in temperature decreasing phase are basically accorded with fitting results determined by Newton's law of cooling. The coefficient ζv fitted from cooling curve can be used as the key factor to identify the location and quantity of leakage, because the magnitude of ζv has a good agreement with the leakage state. Therefore, the seepage monitoring system and its corresponding leakage identifying method are valid.