Based on one of the most widely used datasets by foreign-based sociologists, this paper examines the rate of returns to education in rural China. Compared with the previous studies that showed rather low rates in rural areas throughout the 1980s, this study finds a considerably higher rate in 1996. A chief contributor is the rapid non-agricultural development, which creates enormous upward mobility opportunities, particularly for the more educated. Due to the uneven economic development nationwide, the rate of returns to education varies widely across regions. In areas with less developed non-agricultural sectors, it remains low. In contrast, where off-farm employment is widespread, it is much higher. In addition, the labor market is functioning to allocate the more educated to better-paid jobs, but has yet to produce higher returns to education in non-agricultural sectors than in the agricultural sector. However, changes may be occurring in coastal regions.