Based on the theory of labor division, this paper first establishes a “conceptual framework” of “dynamic cycle evolution of labor division”, and then makes a research on the reasons of urban rural dual economic structure in this conceptual framework, and we next conclude that the primary causes of urban rural dual economic structure is the different development of enterprises and markets between city and countryside, which is different from traditional dual economy theory. Therefore, this paper proves the conclusion by using the time series data through 1980—2011 in China. Finally, we conclude that promoting the development of firm and market through the industrialization of agriculture, agricultural system and generally preferential finance which is deepening division of labor in rural areas and improving labor productivity levels. It is the key of China to successfully achieve the dual structure transformation.