This paper analyzes the characteristics of factor market which China's farmer households now are facing, as well as the decision-making mechanism of production behaviour of farmer households. Based on the survey data from Jianghan Plain and Taihu Lake Plain, this paper makes an empirical analysis on decision-making mechanism of farmer's production behaviour. The result shows that among the factor market faced by farmers, the growth in land market is quite slow, agricultural labor force market is inactive, while labor force in non-agricultural production is very active and the regional differences are obvious as far as the growth of labor force market is concerned. Currently, farmers make decisions in production at the cost of reducing the marginal product of redundant factors, which is a dissimilation process of factor marginal product between redundant factors and scarce factors.