Abstract: The administrative division reform from mid-1980s is a big event in rural China. The reform improves the rate of economic growth, but reduces the public goods provision in some regions. Using the panel data of 31 provinces in 1978-2009 and employing the rational government framework with the fixed effect regression model, this paper aims to explore the causality and the mechanism why the reform would change the public goods provision behavior of the local governments. The theoretical researches show that the reform has different effects on public goods. If the cost of the pubic goods is too large, or their productivity is too small, the reform will have no influence on their provision, or the former will improve the latter. The empirical research estimates the effect of the reform and the results support the theoretical investigation. Lacking of the administrative revenue and the little supervision on the government’s political power may be the reason under the correlation between the reform and the public goods. The suggestion is that the supervising authority should provide a rural biased fiscal policy, increase the level of the administrative budget, limit the political power of the basic level units and establish some special funds for rural public goods.