A hydraulic drive system for construction machines with an improved pressure compensating valve assembly comprising a first directional control valve (3, 5, 7) of closed center type connected in series with a second directional control valve (12) of open center type. The valve assembly comprises an inlet chamber (31) connected to the hydraulic pump (1) and an outlet chamber (33) connected to the second directional control valve (12) of open center type; a flow control valve portion (14A) including a spool (37) having an opening (37a) disposed between the inlet chamber and the outlet chamber, an extent of the opening being changed when the spool is displaced, and a manually operable adjuster (39a) adapted to abut against the spool for setting the extent of the opening; a pressure compensating valve portion (14B) for holding a differential pressure across the extent of the opening (37a) constant; a spring (43) disposed in the flow control valve portion (14A) for urging the spool (37) in a direction to close the opening (37a); and an operating pressure introducing plug (44) to which an operating pressure is introduced for displacing the spool (37) against the spring (43) in a direction to open the opening until the spool (37) comes into abutment against the adjuster (39).