The relationship between agricultural technology progress and farmers’ income growth has received much attention from scholars in domestic and international society. Since W. Cochrane proposed “Agriculture Step Hypothesis”, the view that agricultural technology progress is unfavorable for farmers’ income growth has been widely disseminated. Some empirical researches support this view, which makes some China’s agricultural policies that aim to increase farmers’ income by improving the agricultural technology into a confused position. But there are some important weaknesses of these empirical researches: Firstly, they emphasize merely analysis from a micro-perspective. Secondly, they are only base on some statistical data over a specific period of time. Thirdly, a large number of researches pay much attention to the effect of agricultural technology progress on farmers’ income, while few of them take farmers’ non-agricultural income into consideration. Since the Reforming and Opening, especially along with the increasing industrialization, urbanization, marketization and internationalization, the rural labor force has presented non-agriculture transfer and the Chinese agriculture has apparent multi-development feature of “half farmers and half workers” and “male workers and female farmers”. Therefore, agricultural technology progress in China should have impact on farmers’ income on both agricultural income growth and non-agricultural income growth, the latter of which is influenced by technological progress indirectly. This paper calculates the rate of agricultural technology progress and its contribution based on the annual time-series data from 1980 to 2011 in China. The VAR model with Co-integration and impulse response functions are employed to explore the relationships between the agricultural technology progress and farmers’ income growth and non--agricultural income growth as well from 1986 to 2010. The result shows that the agricultural technology progress in China positively impacts farmers’ income growth not only in terms of the long term but also in terms of the short term. Additionally, it also increases the non-agricultural income of farmers to some extent and these two variables, that is agricultural technology progress and non-agricultural income, are mutual Granger causes to each other. This empirical result indicates, as the agricultural market reform and industrialization in China, the market of agricultural product gradually becomes open from the closed status at the beginning of reform and opening up and the macro environment of agriculture development in China has experienced profound changes. In this context, on one hand, by adjustment of agricultural structure, optimizing the allocation of agricultural resources, changing the pattern of agricultural economic development, agricultural technology progress has contributed to growth of agricultural economic thus promoting farmers’ income, on one side. On the other hand, agricultural technology progress has promoted non-agricultural income growth of farmers thtough the rural surplus labor force transfer. Apparently, the result denies the view that agricultural technology progress is unfavorable for farmers’ income growth but gives support to the policy hypothesis that agricultural technology progress could promote farmers’ income growth. The policy implication is as follows: with farmers’ income growth as the goal, the government should increase agricultural research investment, and carry forward agricultural technology innovation and perfect agricultural technology porpularization system. On the permise of promoting agricultural marketization as well as stabling and raising the agriculture product price, farmers’ income growth should be the main policy objective and essential evaluation mark of agricultural technology progress.