Based on citrus market development in Hubei province,this paper uses New Spatial Economics Theory and adds transaction costs arguments to the potential function model so as to m e clear the relationship between market trade space for agricultural products,transaction costs,and the purchase prices.The result shows that in the past 20 years,citrus production in Hubei has been increasing,but the prices have no obvious change; transaction costs and market trade space are in negative correlation and the transaction costs cause the shrinking of Hubei citrus market trade space and suppress the rising space of the citrus source prices.Accordingly,this paper proposes the following suggestions: supporting of agricultural products distribution organization should be reformed,self-organization of farmers cooperative should be actively developed to reduce the transaction costs,and the market space should also be expanded and the trade flow channel construction should be enhanced.