Abstract: Establishing a compensated rural homestead withdrawal mechanism has great practical significance of alleviating the imbalance between supply and demand for urban and rural land and promoting rural revitalization. Based on household surveys of farmers from 5 counties in Zhejiang and Sichuan, this paper focuses on examining the mechanism of how expectations influence farmers’ behaviour in homestead withdrawal by using moderating and mediating effects. Our research has found that: first, farmers with positive expectations about the future are more likely to withdraw from homesteads. According to the moderating test, farmers’ willingness of homestead withdrawal acts as a mediator between their expectations and homestead withdrawal behaviour. Second, the moderating test shows that the differentiation of farmers is a moderator variable between the willingness and behaviour of homestead withdrawal. Farmers with greater proportions of non-agricultural income are more likely to realize their will of homestead withdrawal into actual behaviour. We are able to conclude that: farmers’ expectations and households’ non-agricultural income share complement each other. An increase of non-agricultural employment or non-agricultural income share will increase the probability of homestead withdrawal among farmers with positive expectations and ability to afford homestead withdrawal. Therefore, we recommend that the government should stabilize farmers’ expectations of future and reduce the opportunity costs of withdrawing from rural homestead to make withdrawal more appealing and affordable to farmers. Relevant policies may include stabilizing farmers’ withdrawal expectations, increasing famers’ employment in non-agricultural sector, establishing a stable employment mechanism for farmers who withdrew from homesteads and providing employment preferential policies.