[Objective] We took Laishui County in Baoding City of Hebei Province as an example, where local peoples' livelihood capital before and after converting farmland to forestland program was compared firstly. The impacting of the program implementation on the livelihood capital was illustrated, and moreover, the impacting of livelihood capital on people' income was analyzed. Upon these, the mechanism of reverting program upon rural households' sustainable livelihood ability was discussed. [Methods] Theory of sustainable livelihoods analysis was used and a linear model of farmers' capital was fitted. [Results] For all the factors that might affect livelihood capitals converting program had obvious effects on natural capital and physical capital, and small effect on financial capital, and no obvious effects were observed on human capital and social capital. Household's livelihood mainly depends on natural environment, i.e., farmers' development is still at a lower level, their livelihood was affected by how many arable lands they own, and how big the gap between the owed cash and the needed amount is, and so on. [Conclusion] Where reverting program is implemented, a careful production planning and proofing should be carried out, which include how to strengthen the households' ability to resist risk and how to diversify livelihood. In the transformation of household to non-agricultural industries, the government should give positive and effective financial support and guide.