Governments at different levels are actively engaging in delivering the high-capacity rail transit system. Under the constraints of limited financial budget and municipal debt level, how to provide sustainable funding and financing for rail transit has become the core issue of transit priority development. A plethora of attention has been paid to the critical issue of adopting land value capture (LVC) to support rail transit development, particularly considering various tools of LVC that reflect different institutional arrangements, operating mechanisms, and policy effectiveness. Although land finance of China manifests the feature of LVC, it is still unsustainable and not specially acted for supporting the rail transit. This paper firstly analyzes the current challenges of funding and financing rail transit in China. Then this paper systematically analyzes the characteristics and practices of different modes of LVC as well as the applicable policy conditions for them to support rail transit. Finally, given different land institutions and municipal fiscal structures, this paper attempts to provide the potential policy and practice directions to enhance the effectiveness of LVC to fund and finance rail transit in China. Besides, this research can shed light on the interaction between the rail transit and land development under different LVC frameworks, which can provide clear policy implications to reach the goal of new infrastructure development based on sustainable financing.