Abstract: Based on the China Land Economy Survey (CLES), this study used Probit and KHB models to construct an analytical framework for the impact of urbanization and livelihood capital on farmers’ willingness to withdraw from their homesteads. In order to gain an objective understanding of the factors driving the paid exit of farmers’ homesteads, it was necessary to thoroughly analyze the relationship between livelihood capital and this phenomenon. The results showed that: (1) Livelihood capital promoted farmers’ willingness to withdraw from homestead with compensation.The presence of natural capital, human capital, and social capital could contribute to an increased willingness among farmers to accept compensation and leave their homesteads. physical capital and financial capital could weaken farmers’ willingness to withdraw from homestead with compensation. (2) Citizenization had a mesomeric effect in the relationship between livelihood capital and farmers’ willingness to withdraw from homestead, as well as in the relationship between natural capital, human capital, social capital and farmers’ willingness to withdraw from homestead, and a masking effect in the relationship between financial capital, physical capital and farmers’ willingness to withdraw from homestead. Therefore, in the process of promoting the withdrawal of homesteads, the principle of voluntariness should be followed, and measures such as increasing farmers’ livelihood capital and implementing policies based on households should be taken to enhance their living ability and thus enhance their willingness to withdraw their homesteads with compensation.