Abstract: The hilly region of the Loess Plateau in China has always been a hot spot in varied sustainable development researches and practices，because of the highlighted problems of poverty and ecology. For a long period，several measures were created or introduced to this region，in order to promote regional sustainable development. Terracing the loess hills is one of them，which indeed works well as a large scale land management project in this region. It has been reported that level terrace has significant ecological and social benefits，primarily in terms of soil and water conservation，as well as providing subsistence and livelihood to local farmers. However，the existing researches have few studies on the economic effects of the level terrace，especially on farmers’ income，which might have an important impact on the continuity and stability of the whole system. Guyuan，a prefecture located in the southern part of Ningxia Hui Autonomous Region，northwestern China，is a typical representative of Loess Hilly Region with large amount of level terraces. It has experienced three upsurges of terrace construction since the founding of the P R China in 1949. And the third upsurge，since 1980s-1990s，is the largest，and lasts until right now. As of 2010，the total area of level terrace in Guyuan amounts to 143 200 hm2，accounting for about 40% of all cultivated land. And dry planting is the main land use type on the terrace in Guyuan. Based on the survey database of all villages in Guyuan，this paper analyses the relationship between current level terrace and farmers’ incomes via quantitative methods of Spearman’s rank correlation coefficient and geostatistical analysis. The result of rank correlation analysis shows that it has no significant relationship between per-capita income of farmers and per-capita terrace area，proportion of the terrace to the cultivated land，even at the 0.1 significance level. Meanwhile，the analysis on geostatistical interpolation results shows that the spatial correlation coefficient between per-capita income of farmers and per-capita terrace area is only -0.015 7，almost perfectly unrelated. So all these results demonstrates that there is no significant correlation between the two factors，which means the level terrace in current situation cannot increase farmers’ income effectively in Guyuan. Further analysis reveals that at least three main causes contributed to the phenomena：（1）excessive population pressure in the region；（2）unreasonable planting structure；（3） outdated land management with low production. Accordingly，several policy suggestions are put forward to maximize the benefit of level terrace，so as to promote regional sustainable development，including：（1）reducing agricultural population through emigration and urbanization；（2）improving planting structure by introducing more economic plants adapted to arid areas in Guyuan；（3）transforming traditional agriculture into industrial and ecological agriculture with local characteristics；（4）looking for new ways of terrace utilizing，such as eco-tourism，etc.

Key words: level terrace, farmers&rsquo, income, loess hilly region, Guyuan