Abstract: Based on emergy theory and method, resource utilization, environmental pressure, variation of emergy indexes and efficiency of agricultural eco-economic system were analyzed before and after “grain for green policy” from resource input and output in zhifanggou watershed in loess hilly region of China. The results showed that the total emergy output of agricultural products of agricultural eco-economic system was 7.53E+18 sej before grain for green in watershed, and decreased 1.50E+17 sej after this policy. The production of agricultural products per unit area increased from 5.38E+15 sej/hm2 to 1.68E+16 sej/hm2 and emergy output of animal products decreased. The dominance index of system production increased from 0.60 to 0.72, the stability index of system increased from 0.51 to 0.53, and the population carrying capacity was also increased after grain for green. However, emergy investment ratio and environmental loading were nearly stable. Net emergy yield ratio increased from 0.11 to 0.29, and emergy per capita also change from 5.16×1015 sej to 5.41×1015 sej. Index of system sustainable development also increased from 2.55 to 6.69. After grain for green, the ratio of emergy-monetary was 2.21×1012 sej/＄, which changed little as compared with before returning farmland. For sustainable and stable development of agricultural ecosystem in zhifanggou watershed, adjusting agricultural structure, optimizing the allocation of resource input, improving resource productivity and reducing the environmental loading were all needed in the next step. In this way, the agriculture of zhifanggou watershed could develop more sustainable and healthy.