By using the related data of China during 1995-2011, this paper makes dynamic measurement on agriculture modernization level of China for raising grain production and labor productivity and conducts empirical analysis of its relation with the income growth of peasant households. The results show that China’s agriculture modernization level is rising year by year and plays an obviously boosting role in the increase of peasant household business income mainly by expansively using chemical fertilizer and other chemical farm products and by water conservancy. Currently, China’s human capital level of peasant households is fitting for agriculture modernization represented by water conservancy and expansively using chemical fertilizer and other chemical farm products, the raising of human capital level obviously promotes the increase of business income of peasant households based on water conservancy and expansively using chemical fertilizer and other chemical farm products but is highly in contradiction with the agriculture modernization represented by mechanization and electrification, as a result, the raising of human capital level of peasant households restricts the boosting effect of mechanization and electrification on the increase of their business income. Finally, the related policies and suggestions for the raising of human capital level of peasant households are pointed out.