In recent years Chinese government policies and research programmes have advocated agricultural industrialization in order to raise demand for farm products, facilitate structural adjustment in agriculture, create rural employment and increase farm incomes. But although agro-industrial activities have become a key feature of China's rural development strategy, the agricultural industrialization policy has been little studied outside China. This article is a case study of the implementation of agricultural industrialization and its impact on rural livelihoods in Sichuan province. It identifies and analyses two major forms of agricultural industrialization: “dragon head enterprises” and “rural associations.” Although agro-industrial development is likely to be a critical determinant of China's future social and economic trajectory, the preliminary analysis given here shows a mixed picture. Positive effects include increases in both income and employment. But there is also a negative dimension, shown by the existence of numerous entry barriers, unequal bargaining power and an uneven distribution of benefits.