This article describes the process of institutional transition of contract farming in Shandong Province. The changes in preparatory stage of contract farming express in: One, the information asymmetry of the two sides of the contract is reducing; Two, the security system of contract farming tends to be perfection; Three, the organizational form of contract farming tends to be simplification. The measures taken in production stage of agricultural product are as follows: The first is investment in means of production; the second is perfection of field management; The third is soundness of quality test. The measures taken in purchase stage of agricultural product are as follows: First, product is developing from preliminary working to intensive processing; Second, leading enterprises develop to large-scale and standard. The changes in profit distribution stage of contract farming are as follows: First, the profit relationship between enterprises and peasant households turns from opposition to mutual benefit. Second, the means of default issues turn from emotional self-discipline to rational self-discipline. Performance of contract farming is analyzed: First is putting forward the transformation of agricultural operational form; Second is reducing the uncertainty; Third is truly realizing the risk sharing and participation of interest. The defect of institutional transition of contract farming is discussed: First is no longer the operational form that benefits many farmers; Second is still the typically incomplete contract; Third is expansion of capability gap of business game between leading enterprises and farmers; Fourth is the still existence of information asymmetry; Fifth is informal institution falling behind formal institutional arrangement. The corresponding countermeasures are put forward: First is developing professional cooperation; Second is completing land circulation system; Third is constructing honest information system; Fourth is building social honesty system.