Abstract: Most of vegetable varieties have widely been applied in China at present. Transplanting plug seedlings can greatly contribute to the survival ratio of seedlings, and the resistance to disasters during the growth for better quality and yield of vegetables. However, current manual seedling fetching and transporting seedlings were commonly used in a semi-automatic transplanting machine with high cost and labor intensity. In this study, a fully automatic plug-seedling transplanting and planting machine was developed to meet the transplanting operation mode and agronomic requirements for high efficiency, where the seedlings were taken in a row to be divided, and then be dropped. The transplanting machine was mainly composed of a tray transfer, a seedling picking and dropping, a flexible chain seedling transporting, and a planting mechanism. Plug seedling transplanting was automatically realized under the cooperation of the valve control cylinder movement and mechanical transmission. The simple control system presented a novel structure to gain higher work efficiency. Furthermore, only one operator was required to place the seedling tray, indicating the labor cost-saving. A tractor was used to haul the automatic plug-seedling transplanter, where an air pump driven by a power output shaft was selected to generate the compressed air, thereby providing power for the automatic seedling picking and dropping system. The ground wheel was also utilized to drive the planting and flexible chain conveying mechanism when rotating the plug seedling. A three-dimensional design Solidworks software was used to design the specific structure after the valve control strategy was determined. Correspondingly, the movement trajectories of seedling plate putter and plug seedlings were analyzed to determine the key structure parameters of the plate-moving mechanism. A variable-step ratchet device was also characterized to confirm the size of key components. MATLAB platform was utilized to carry out the structural optimization. The force was thus determined for a seedling clamping device, together with the main component of the seedling picking and dropping mechanism. The key parameters were also determined for the cylinder of a seedling clamping device. FluidSIM software was used to simulate the pneumatic circuit system under different system parameters, further optimizing the design of a pneumatic circuit with simple structure, reliable work performance, and high efficiency. A field trial was conducted using chili seedlings with an average seedling height of 166.7 mm. Evaluation indicators were set as the success rate of seedling taking and dropping, planting frequency, coefficient of variation of plant spacing, and lodging rate. The test results showed that the average success rate of planting and dropping seedlings was 97.07%, and the planting frequency was 123 plants/min, when the working pressure was 0.4 MPa, while the operating speed of a transplanter was 1.4-1.7 km/h, and the moving parts of the machine cooperated well during working. Specifically, the lodging rate was 1.67%, and the coefficient of variation of plant spacing was 3.67%. The data was well in accordance with the machinery industry standard JB/T10291-2013 “Transplanter of dry land plant”. It verifies the rationality of plug seedlings with automatical transplanting. The finding can provide sound technical support to improve the automation level of a plug-seedling transplanter in agricultural production.