Abstract: Multi-purpose land use has been a new concept to explore the sustainable development of diversification and multifunction in rural areas. It is necessary to make tradeoff decisions on agricultural production and biodiversity conservation in the rural modernization. The change of rural settlements can also provide a sound support to the multifunctional rural land management. Multifunctional transition and transformation of settlements pattern have become the inevitable requirements of regional development, particularly on their internal correlation and interaction. Most previous studies individually focused on the rural multifunction and settlements, but a systematic investigation on the general law and internal mechanism is still relatively lacking. In this study, the current state was summarized for the multifunctional transition and transformation of rural settlements from the time scale, and clarified their interaction mechanism, according to rural multifunction theory. The results show that: 1) The multifunctional transition in rural areas can be the process of continuous differentiation, and re-integration of rural production, life, and ecology functions. Driven by urbanization, industrialization, and marketization in modern agriculture, the multifunctional transition in rural China has experienced four stages, including low level of weak function, function differentiation and development, function conflict, and high-level multifunctional collaborative development; 2) The transformation of rural settlements showed an excellent development process from disorder to order. Driven by internal and external factors, such as physical geography, social needs, policies, and institutions, the rural settlement presented five patterns, namely, the shrinkage of overall scale, the aggregation and contraction of settlement layout, the hierarchy and networking of rural settlements system, the protection and utilization of rural settlements culture, and the diversification and functional mix of rural settlements landscape; 3) A two-way coupling effect can be found between the multifunctional transition and the transformation of rural settlements, jointly impelling the development of rural regional system. The transformation of rural settlements can provide a necessary support for rural function implantation, adjustment, and improvement, further to promote the multifunctional transition in rural areas. The multifunctional transition can facilitate the transformation of rural settlements by driving the main body intervention; 4) A recommendation can be that the optimization direction of rural settlements can be fully suitable for the development trend and stage characteristics of multifunctional rural transformation. A "smart contraction" of rural settlement has become urgent to optimize the internal spatial structure of rural settlements, in order to improve the rural settlements system and service facilities, while strengthen the protection and inheritance of native culture. A new way can be explored to remold a native landscape by integrating modernization and localization, further to establish a planning system of the rural settlement, for the multifunctional and high-level sustainable development of rural areas; 5) Against the background of rural revitalization strategy, it can be the key direction of future research to explore the optimization path and development mode of rural settlements under the function synergy guidance, based on the multifunctional value of rural areas.