The reform of rural homestead system is not only key for Chinese land system reform in the new era，but also essential for unblocking the urban－rural economic circulation and building the new development structure. On the background of the new development structure with urban－rural economic circulation，this study tries to provide a comprehensive definition of urban－rural circulation and analyzes its requirements for the homestead system reform. Furthermore，this study designs an overall picture for future homestead system reform for circulating urban－rural economy based on the experience of its insti- tutional reform. This study points out that urban－rural economic circulation is impeded by the underde- velopment of rural area，and the homestead system reform is crucial for prospering rural development. Thus，this study suggests to deepen the rural homestead system reform in China from the following aspects，i. e. ，improving planning system in rural area and moderately relaxing the control of homestead use，clarifying the ownership of property rights and completing its rights，establishing the transaction market and standardizing the rules，etc. These measures are expected to ease the spatial ur- ban－rural separation，promote bidirectional flow of resources between city and village，equalize the pub- lic services and infrastructure，and thus further motivate rural development and eventually realize the ur- ban－rural economic circulation.