Leakage problems are common in the water supply pipeline system, which will threaten the health of residents and cause economic losses. Negative pressure wave (NPW) technology calculates the time difference through the inflection point to locate the leak. However, due to the nonlinear and nonstationary characteristics of the pressure signal, it is difficult to obtain an accurate inflection point of the NPW by the traditional method. Therefore, the advantages of applying variational mode decomposition (VMD) in NPW technology are explored. Firstly, the correlation coefficient and permutation entropy (PE) are used for effective intrinsic mode function (IMF) component selection and parameter optimization. Thus, an adaptive denoising method based on VMD (AD-VMD) is presented. Then, to effectively separate the detail features of the NPW, a novel inflection point extraction method based on VMD (IPE-VMD) is proposed. Simulation and experimental results show that AD-VMD can effectively suppress noise interference and conserve the mutation characteristic of the leakage. IPE-VMD can obtain a distinct maximum peak at the inflection point and has good robustness to noise interference. This method can calculate the time difference precisely and stably. In addition, the accuracy of the leak location is verified. The average relative positioning error is 5.13%.