Abstract: The development of agricultural production service industry is promoting the innovation of agricultural production and management system and mechanism and it is a very important condition for the realization of agricultural modernization. It is also critical to ensure national food security, maintain effective agricultural product supply, and increase farmers’ income. This paper examined the mechanism and the influencing factors of the spillover effects from the development of agricultural production service industry on reducing the income gap between urban and rural areas, improving the agricultural industry chain integration, speeding up the rural area urbanization, and enhancing the science and technology’s contribution to agriculture. In addition, this paper also analyzed the existing problems of China's agricultural production service industry, including small scale, low level of service organization, unreasonable structure, low quality of employees etc. To address these problems and to enhance the spillover effects, these paper also provides suggestions as follows: 1) to optimize the policy environment; 2) to improve infrastructure; 3) to encourage the organization and business model innovation; and 4) to improve the professional quality of employees.