Rapid development of the township and village enterprises (TVEs) has facilitated China''s economic growth strategy. Government policies, such as the TVEs Law, aim supports to further develop the TVEs. However, serious ecological deterioration has accompanied this rapid growth and environmental pollution has spread from the urban areas to the rural areas. Based on the social, economic and environmental situation in China, the research shows that development of TVEs has some positive effects on increasing peasant''s income and absorbing the surplus labor forces in rural areas. But environmental pollution from TVEs has brought harmful impacts on ecological environment, human health, and affected agricultural production. Development of TVEs is not an isolated issue, but there are interactions among the environment, economy, and society. This research uses strategic environmental assessment as an approach to develop possible alternatives as recommendations to solve the complex issues, and should be useful to anyone who is interested in the China''s environmental protection and agricultural sustainable development.