This paper explains the formation of a farmer professional cooperative and analyzes inner mechanism which influences such formation from the perspective of new institutional economics.The result shows that asset specificity in the production process of farmer households and corresponding opportunism of party to transaction in the process of transaction are the main driving forces for farmer households to establish cooperatives.As for farmer households,establishment of cooperatives can improve their market positions in negotiation,reduce transport cost,improve market competitiveness of agricultural products,and obtain additional profits,which are the inner causes of farmer households to cooperate.Moreover,farmer households cannot establish cooperatives without guidance and promotion of government.Because cooperatives established by farmer households will suffer from the dilemma of “collective logic”,guidance or certain compulsive means of government are playing an essential role in establishing a farmer cooperative.