Abstract: Increasing demand for green agricultural products means that the traditional smallholder farm industry cannot meet customers’ requirements, which has encouraged new agrarian business entities to engage in green production. This study used micro survey data from 293 vegetable family farms in Shandong Province to construct a model and empirically test the decision-making mechanism of green production for new agrarian business entities. Based on the theory of planned behavior (TPB), this study added the decision-making process of “environment → cognition” to the TPB to investigate the premise that the “external environment is consistent and stable,” and constructed a decision-making framework mechanism of “external environment → internal cognition → behavioral intention → behavior implementation”. We tested the decision-making framework using structural equation modeling (SEM) and a multi-group analysis method. The conclusions were as follows: 1) from the perspective of the mechanism of action, the external environment (market incentive and government regulation) impacted behavior implementation through the mediating role of internal cognition (behavior attitude and control cognition) and behavioral intention. The relevant hypotheses were significant, and the decision-making model had a good explanatory power for the pre-, during-, and post-green production behavior implementation of vegetable family farms. 2) The influence effects of market incentive, government regulation, behavior attitude, control cognition, and behavior intention were 0.393, 0.177, 0.260, 0.423, and 0.296, respectively. Between the external environmental factors, market incentive was more important than government regulation; while between the internal cognitive factors, control cognition was more important than behavior attitude. Overall, market incentives and control cognition had the greatest effects, followed by behavior and attitude. There were two important decision-making paths: market incentive → control cognition → behavior implementation and market incentive → behavior attitude → behavior implementation. 3) As per factor loading, the load coefficients of industrial cooperation and consumption demand, ecological compensation and technical training, economic value cognition, and behavioral obstacle cognition were the key factors of market incentive, government regulation, behavior attitude, and control cognition, which were important factors in forming the internal cognition of the external environment. Combined with the effects of the potential variables, more attention should be given to the influence of industrial cooperation, consumer demand, behavior obstacle cognition, and economic value cognition on the implementation of green production behavior. 4) The green production decision-making mechanism of family farms with different scales and number of generations of farmers differed. The behavioral intention of small farms did not have a significant impact on behavior implementation, and the behavior attitude of the older generation and small farms did not have a significant effect on behavioral intention. The behavior attitude of large farms did not have a significant effect on behavior implementation, and government regulations did not have a significant effect on behavior and attitude of small farms. Therefore, we should strengthen policy guidance and support for cultivating the market environment, reducing endowment constraints, enhancing economic performance, and rationalizing the decision-making mechanisms to promote green transformation for different types of family farms.