Abstract: This paper analyzed the dilemma, circumstance and countermeasures of China’s dairy industry from the perspective of structural reform on the supply side. Results show that there are several problems in the supply side of fresh milk, including high cost, low efficiency, continuous price fluctuation, insufficient supply capacity, and increasing high pressure on resources and environment. On the supply side of dairy products, there are also several dilemmas, including much higher price compared with the price of the consumption side, the contradiction between upgrading dairy products and lower demand level of dairy products, and the stable quality of infant formula milk powder confronting consumers’ distrust. In the context of decreasing domestic consumption, transformation and upgrading of dairy product consumption structure, and accelerated penetration of imported dairy products of various and uneven quality, to promote the transformation development of China’s dairy industry, this paper suggests: to improve the production efficiency of raw milk, to reduce the cost along the supply chain, to construct a reasonable profit distribution mechanism among different links, to guarantee the supply of raw milk with stable price, and to adjust and optimize the product structure to adapt to market changes.