Abstract Using the survey data of 1218 households in 25 poverty-stricken villages in five provinces, this paper does a quantitative study of the relationships among farmland transfer, rural labor transfer and poverty reduction for farmers. It also analyzes the mechanism of the positive function farmland transfer has on poverty reduction. The results show that farmland transfer promotes poverty reduction for farmers through the dual effects of competence effect and income effect, in which the latter enjoys dominance. Farmland transfer does have positive effects on rural labor transfer to some extent, compensates the capability poverty of farmers in the new environment, and further boosts the income effect, allowing a faster process and bigger possibility in reducing poverty as well as a lower chance of returning to poverty.