The development of agricultural products circulation industry is a powerful lever to activate and leverage rural economy． The preference of institutional design and arrangements are important factors that affect industrial development in China, and have a direct impact on the development of the agricultural products circulation industry. The article calculates the degree of market segmentation of agricultural products by the method of distinguishing the urban and rural relative price index, and empirically analyzes the influence of urban preference and market segmentation on the development of agricultural products circulation industry based on the data of 27 provincial-level panels between 1997 and 2015. Our analysis reveals that: in the long term, urban preference drives the development of the circulation industry of agricultural products, but hinders in the short term when the regional economy is underdeveloped. In general, the market segmentation suppresses the development of the agricultural products circulation industry, and has a “U” relationship with it. But at a certain period, it plays a protective role, which shows the inverted “U” relationship. Furthermore, there are regional differences in the urban preference and market segmentation impact on agricultural products circulation industry, which is the largest in the eastern provinces, the second in the west and the smallest in the middle. Therefore, we should promote the development of the industry by improving the urbanization rate of the population, speeding up the rural modern process, and increasing the productivity of the factor in the circulation of agricultural products.