China’s economic reforms make the farmers face the risk of land reallocation and adjustment, raising the questions about the impact of land reallocation on farm productivity and efficiency. Deep understanding what determines land reallocation, whether and to what extent farm productivity and efficiency are affected by the frequency of land reallocation could help policy makers introduce better targeted rural development policies. The aim of this study is first to explore the determinants of land reallocation, and then analyze how land reallocation influences productivity and efficiency in agricultural production. This study is based on panel data set over 1995-2002 from rural households in Hubei and Yunnan provinces. Our results indicate that the likelihood of land reallocation is influenced by the opportunity of off-farm employment and the geographic characteristics and location of the village. The development of land rental market is substitute of land reallocation in optimizing the allocation of land resource. Average technical efficiency was found to be 72%. Farms with high variability in farm revenue were found to be more technically efficient than farms with low revenue variability. The predicted probability of land reallocation was statistically significant among factors affecting farm productivity and efficiency. In other words, we do find the systematic difference in farm productivity and technical efficiency between farmers have been reallocated land or not during the period of land tenure.