Abstract: The Johan Heinrich von Thunen’s agricultural location theory, which was based on the hypotheses of “isolated state” and “land”, was used to explain the spatial distribution of land use in China from the macro perspective. It highlighted significant differences between practical land systems and rural development in China, and applied agricultural location theory to blindly explain China’s conditions and needs. MapInfo 7.0 and ArcGIS 9.3 softwares were used in conjunction with qualitative and quantitative analyses and digital Google Maps to analyze these conditions and needs in this paper with Wugou Village of Henan Province as a case. Wugou Village did not meet “isolated state” hypothesis for the following reasons: (1) It was not only far from urban areas without agricultural trade with urban milieus, but also self-sufficient in food, vegetables and other cash crops. (2) The terrain was mountainous, different elevations with different soil fertilities, easiness of cultivation and significantly different production costs. (3) Severe droughts, little rainfalls, deep groundwater and inadequate artificial irrigation facilities. (4) Abundant population and disharmonized agricultural labor structure. (5) Fragmented land, frequent land swaps, poor land mobility, and limited agricultural production. The analysis showed that as a mountain village, the factors that influenced Wugou’s spatial layout of agricultural production were more complicated than those of the plains. Firstly, the terrain was the main factor influencing farmland distribution and vertical stratification pattern of agricultural production in the mountain village. The elevation and slope reflected the degrees of ups and downs with direct impacts on land fertility, farming difficulty and transportation cost. Secondly, land accessibility significantly determined the input-output dynamics of the mountain village’s farmlands. Thirdly, the average land share and complex terrain caused significant fragmentation of the mountain village’s agricultural lands. Hence farmlands of Wugou Village were mainly distributed along roads and circle-like expanded to both sides of road. Structure of agricultural production showed stratified pattern along altitude, forest land was mainly in land higher than the village, while vegetable and crop lands were in land lower than the village. Based on the analysis, three main bottlenecks (terrain, drought and transportation) limited the development of Wugou Village. To that end, the following recommendations were forwarded: 1) Taking measures that favor not only the local conditions but also take advantage of the terrain. Measures such as transforming the planting system to adapted mountain village with crops balanced and enhance grain-crop/cash-crop ratio. 2) Improving land use value by reforesting farmlands through national forest development programs. Fruit trees can especially serve both the purpose of forest and cash income. Animal breeding and wild plant cultivation programs can be instituted to exploit the local agricultural characteristic. 3) Artificial water conservancy facilities can be constructed to support agricultural developments using allocated state/special funds to improve irrigation systems and harvest practices. 4) Transportation systems of the village can be improved along with enhanced communication links with the outside world. 5) Transfer of land use can be made flexible via direct state policies. This can allow households to contract responsibility of their allocated lands to conversion programs such as forest cultivation. Under such policies, peasant households can change their land use in line with direct contracts to stimulate farmers’ motivation to add value to agricultural and barren hills. 6) The rich stone resource can be used to establish stone mining and processing, which can in turn absorb surplus labor and increase non-farm income.