Audio magnetotelluric (AMT) is an effective exploration method to study the electrical structure of strata based on the electrical differences of rocks. The gas hydrate in the permafrost has the characteristic of high resistivity, which is different from the surrounding rock electrically. The AMT method can be used for the exploration and evaluation of gas hydrate in the permafrost. Based on the actual geological characteristics of gas hydrate reservoir in the Qilian Mountain permafrost, the geoelectric model of gas hydrate reservoir is established by combining with resistivity logging. The application range of AMT method for gas hydrate reservoir detection and the optimal acquisition parameter setting scheme were simulated by using finite element method and nonlinear conjugate gradient method. When porosity of gas hydrate reservoir is less than 5%, gas hydrate saturation is greater than 70%, occurrence scale is less than 50 m, or burial depth is greater than 500 m, AMT technique cannot identify and delineate the favorable gas hydrate reservoir. Survey line should be more than twice the length of probable occurrence scale, while tripling the length will make the best result. The number of stations should be no less than 6, and 11 stations are optimal. At the high frequency section (10~1000 Hz), there should be no less than 3 frequency points, 4 being the best number. The research results could provide important reference for gas hydrate reservoir electrical prospecting in the Qilian Mountain permafrost.