Abstract: Abstract: The "hollow village" is becoming an increasingly serious problem with the rapid development of industrialization and urbanization, followed by great waste of precious land resource, high cost in rural public resources allocation, hard work, and so on, which finally results in lagging urban-rural integration. However, these problems can be relieved through the rural settlements renovation. And the rural settlements spatial optimization layout is the core issue to be resolved in the rural settlement renovation, which should be valued. The difficulty in the rural settlements layout optimization lies in the combinatorial optimization of multiple locations, rather than the selection of single one. This paper put forward an iteration evaluation method based on iterative calculation of rural settlements development potential and an algorithm of rural settlements layout optimization, which was applied to Xinzheng City, the study area in Henan Province. The purpose of this study is to find a solution to rural settlements layout which can meet the living and production needs of rural settlements. In the optimization of rural settlements layout, it is assumed that the core function of rural settlements eventually returns to the primary industry. Based on this situation, the following steps were in process: First of all, given the needs of living and production, the ideal farming hinterland scale of rural settlements was estimated and the accessibility constraints of the living and production were obtained to design an appropriate model for rural settlements layout. Secondly, we obtained the suitability evaluation results of rural settlements by employing multi-factor evaluation method. Thirdly, the stepwise selection method was used to get the iteration evaluation results of rural settlements through iterative calculation. Finally, the rural settlements optimal layout scheme and partitioning renovation strategies were formulated according to the iteration evaluation results. Some conclusions were drawn in this research as follows: 1) Ideal model parameters of village layout according to living and production needs of rural settlements were proposed including the standard distance of 2.5 km between villages, the largest farming radius of 1.44 km and the settlement hinterland area of 541.27 hm2. 2) The results of rural settlements development potential showed a non-uniform distribution that was a pattern of from high to low from the east to the west using the suitability evaluation method, while the results presented a relatively uniform distribution when taking the iteration evaluation method. Obviously, it is more reasonable to adopt the iteration evaluation method to optimize the village layout. 3) Therefore, taking Xinzheng as an example and using the iteration evaluation results to optimize the village layout, 17 center villages and 103 general villages were set. The rest ones were demolition villages and divided into government leading demolition type and planning guidance demolition type, which were to be cleared away and relocated. The corresponding land management countermeasures are proposed for different types of villages. In a word, the iteration evaluation method for rural settlement can effectively solve the rural settlements layout problem and also provide reference for related research.