The pilot programme will be run in three experimental rural reform regions in Jiangsu, Sichuan and Guizhou, and four counties in Heilongjiang, Shandong, Zhejiang and Chongqing Municipality, the Ministry of Agriculture said in a statement.
Under the ruling Communist Party of China (CPC) governed system there are two kinds of land ownership in China - urban land is owned by the state and rural land is normally under collective ownership.
Under the pilot scheme, farmers will be allowed to turn their land-use rights into shares in farming enterprises or cooperative societies, state-run Xinhua news agency reported.
The ministry has ordered local governments in the seven chosen localities to submit detailed plans before May.
Early this month, Fu Ying, a spokesperson for China's parliament said the reform is to support the development of agriculture modernisation and urbanisation and it intends to better protect farmers' rights and interests during the process of reforms.
He also said that to avoid instability in launching major reforms, the National People's Congress usually conducts some experimental reforms in certain areas first before making it a nationwide law.