For ultra-low-SNR underwater weak signal processing problem, an underwater echo signal processing method is presented based on the theory of sparse decomposition and the combined matched pursuit method. The focus is how to integrate the prior information, such as the incident signal and the echo model, into the sparse dictionary (atoms). First, the highlight model of underwater echo signal is established, the relation between the echo model and incident signal is obtained, and the over complete dictionary fitting for echo signal characteristics is structured by discretizing, energy normalizing and shifting the known transmitting signal. And then, the sparse decomposition of underwater echo signal is conducted based on the matched pursuit method, and the processing results are compared and analyzed with the commonly used matched filter methods. The simulation results show that the proposed method can accurately reconstruct the original echo signal, and has obvious advantage in processing underwater echo signal with ultra-low SNR.