As the largest conservation program and payments for ecosystem services in China, the grain-for-green program (GGP) has substantially changed land use and cover, and reduced soil erosion in participating areas. However, whether the GGP enhances participants’ livelihoods still lacks robust evidence. Based on the sustainable livelihood framework, the objectives of this work is to understand how livelihood capitals of participants changed and to examine which factors influenced participants’ livelihood activities and land use choices and to what extent before and after implementing the program. We found that despite a significant reduction in arable land area per capita, the GGP dose indeed do no harm to participants’ lives. In contrast, through key forces such as savings and debt, income diversity, education and health, transportation, and off-farm job opportunities, participants in the program have switched livelihood activities dominated by subsistence farming into off-farm activities such as migrant labor and rural business or high market-oriented horticulture/orchard farming. Transportation, education, health and off-farm work opportunities, income are key factors affecting livelihood activities. Besides, sustained and sound subsidies would contribute to improving participants’ livelihoods.