Abstract: There are institutional contradictions between the personal interests and common property rights, the distribution ways according to labor and capital constraints, the democratic principles and low efficiency of management within the Agricultural Cooperatives under the traditional cooperative principles. Through the path of innovation such as the clarity of property rights structure, the diversification of distribution forms and the rationalization of control rights, cooperatives can be developed into the modern agriculture organization which can meet the needs of modern agriculture's development. In the background of market-oriention and internationalization in agriculture, the motivations of the cooperatives' institutional change depend on both the internal factor price changes, and the impact of external industry development environment. Therefore, we should focus on the improvement of internal institutional arrangement, the external institutional environment and institutional innovation in rural areas of cooperatives, so as to further improve the institution of agricultural cooperatives.