Waterflooding will open natural fractures to form induced fractures, which differ from hydraulic fractures because the hydraulic fracture is filled with proppant but the induced fracture is not. Natural fractures are connected by waterflooding. However, because the waterflooding pressure is limited, induced fractures cannot run through the entire reservoir but instead form multiple parallel induced-fracture bands in the vertical direction. Currently, using conventional finite-conductivity methods to match field data will obtain unreasonable results, especially the half-length, conductivity of fracture, and reservoir permeability, which lead to the water breakthrough, which cannot be found in time. This paper presents the waterflooding-induced bilayer fracture (WIBF) model, considering induced-fracture dynamic closure (IDC), dynamic induced-fracture storage (DIS), and induced-fracture radial flow (IRF) effects. Two innovative flow regimes are interpreted, which are dynamic induced-fracture flow and early radial flow regimes. Five innovation parameters are introduced into the WIBF model to describe the IDC, DIS, and IRF effects. The WIBF model is calculated and solved by the Green equation and Newman product methods. Induced-fracture storage coefficient and half-length closure equations are derived to characterize the unique induced-fracture properties. Analytical and numerical methods verify the model’s accuracy. The WIBF model matches a type field case to prove its practicability. Results show that compared with the conventional finite-conductivity model, the proposed model matches the field case well and the interpreted parameters are consistent with the water injection profile and actual field data. The pressure derivative curve shows an early horizontal line, identified as a pressure response of bilayer-induced fractures. If the flow regime is misidentified as pseudoradial flow, some obtained parameters will be absurd, and permeability will be amplified many times. In conclusion, physical and mathematical models are established to describe induced fracture. Induced-fracture storage coefficient and half-length equations are derived. Model matching and equation calculation methods are mutually validated to improve the accuracy of the obtained parameters. Dynamic induced-fracture half-length is interpreted quantitatively to make the engineer take action before the water breakthrough. The model in this paper also provides some parameters for infilling well patterns or determining well spacing economically.