Overall urban and rural development is an important task for China to realize all-round well-off society, and urbanization is a big engine of China’s economic growth after reform and opening-up, as a result, rural areas are an important market to initiate domestic demand. By using 9 basic indexes of overall urban and rural economic development, the comprehensive index for embodying overall urban and rural development level is constructed by principal component analysis method. And the relation between overall urban and rural development, urbanization and rural inhabitant consumption is studied by VAR Model. Analysis shows that both overall urban and rural development and urbanization are the Granger Cause of rural inhabitant consumption, that overall urban and rural development and rural inhabitant consumption are Granger Cause of the urbanization, that from long-term point, the shock on both overall urban and rural development and urbanization has positive influence on rural consumption. Furthermore, the contribution rate of the two to rural consumption change is more than 50 percent. China should initiate and boost rural domestic demand market development by overall urban and rural development and urbanization and use rural inhabitant consumption to promote endogenously new-style urbanization progress under the background of overall urban and rural development.