We proposed a modified Green element method based on edge-based element concept. Unknowns and matrix dimension are reduced. Then, a local grid refinement method is proposed based on the improved Green element, which ensures precision in early flow regimes for fractured horizontal wells with complex fractured networks. Solution of a degradation model solved with the method is compared with solutions obtained with a semianalytical model and numerical simulation. It verifies accuracy and efficiency of the improved Green element method based on local grid refinement. Finally, effects of model parameters on transient behavior is analyzed. It shows that the Green element method is a high precision dynamic simulation method, which improves computational efficiency of dynamic simulation of fractured horizontal well by setting node on edge of grid. In addition, local grid refinement method applied to the modified Green element method is based on superposition principle, in which interpolation approximation is not needed. The method is of high accuracy. Under same grid systems, local grid refinement based on improved Green element method is better than using finite difference. On the other hand, conductivity of complex fracture, permeability and size of stimulated reservoir volume have great influence on transient behavior of fractured horizontal wells. These effects should be taken into consideration and interpreted in transient behavior analysis.