Studying how land acquisition affects the income and life quality of rural households is key to achieving Pareto improvement and successfully promoting people-centered new-type urbanization. Based on data from the China Household Finance Survey, this paper uses land acquisition as a quasi-natural experiment to examine how it changes the income and life quality of rural households whose land has been expropriated. It finds that land acquisition increases the income of the rural households concerned, and this result still holds after a series of robustness tests. The mechanism analyses show that land acquisition increases the income of rural households by attracting more enterprises through increasing the industrial land and improving infrastructure, and by increasing the off-farm employment of these rural households. The heterogeneity analyses suggest that formal employment, skills training and social health insurance can enhance the income-raising effects of land acquisition. The study also shows that because land acquisition undermines the insurance function of land, rural households whose land has been expropriated are more concerned about future insecurity and their income growth is not accompanied by increased consumption and well-being. These findings provide important policy insights for deepening the reform of the land acquisition system to ensure that the general public shares in the fruits of development.