A hydraulic drive system has a hydraulic pump (1), an actuator (2), a flow control valve (5) disposed between the hydraulic pump and the actuator, a pressure compensating valve (8; 8A; 8B) having a valve spool (23; 23A; 23B) that controls the differential pressure (Pz-PLS) across the flow control valve, and a pump delivery rate control device (9) for controlling a flow rate of the hydraulic fluid delivered from the hydraulic pump dependent on a differential pressure (Pd-PLS) between a pump pressure and a load pressure of the actuator. The pressure compensating valve has a first control chamber (30; 30A) subjected to the load pressure (PLS) of the actuator such that the load pressure acts on a first pressure receiving section (28; 28A) of the valve spool to urge the valve spool in the valve-opening direction, a second control chamber (29; 29A) subjected to the inlet pressure (Pz) of the flow control valve such that the inlet pressure acts on a second pressure receiving section (27; 27A) of the valve spool to urge the valve spool in the valve-closing direction, and a target differential pressure setting arrangement (31, 50, 51; 31B, 51) for urging the valve spool in the valve-opening direction. A damping capability to the actuator (2) is provided by setting pressure receiving area (Az) of the second pressure receiving section (27; 27A) to be greater than a pressure receiving area (ALS) of the first pressure receiving section (28; 28A).