Based on participatory rural appraisal from 16 typical villages of Yishui County in Shandong province, this paper selects three indicators such as employment of farmers, income and time to explore farmer’s livelihood structure. According to the dominant behavior of rural household employment and its regional differences, this paper analyzes the following four types of livelihood activities of rural households: non agricultural employment outside the county, nonagricultural employment inside the county, part time employment inside the county and agricultural production in order to quantify the rural household livelihood differentiation level. The result shows that firstly,suburb rural households hold the highest non-agricultural level, in which most rural households labor have chosen non-agricultural employment inside the county areas, and the proportion of the rural nonagricultural labor concurs with the proportion of the rural non-agricultural income and non-agricultural time. Secondly, suburban rural households show a remarkable tendency of non-agricultural employment autonomously, most rural households have chosen non-agricultural employment outside the county areas, and the livelihood activities of rural households are out of accord with economic structure environment in traditional agricultural regions. Thirdly, the part-time rural households non-agricultural employment were unstable, but the tendency of nonagricultural employment were outstanding. Fourthly, an overwhelming majority of rural households of agricultural production have chosen to plant economic crops as the source of agricultural income, and formed a different economic crop planting area, and this regional rural households have substantial possibilities for large scale agricultural production. Therefore, governments should take the targeted policy arrangements for different rural households types according to the characteristics of rural household differentiation and its development trend.