The development of specialized villages in China is an interesting trend. This paper studies specialized villages in China by using the rational small household theory, division of labor and specialization concepts, as well as the distance decay and neighborhood effect theories. We use the census data on specialized villages in Henan Province (the largest agricultural province in China) from 2010 as the basis for a case study, applying dummy variables representing sixteen types of specialized villages, and selecting environmental variables, such as land form, location, arable land area, and labor force characteristics. We find that significant factors related to specialization are location and production factors. Policy implications of this research are discussed.