With surplus agricultural labor moving to the cities, China adopts the project institution to promote agricultural development. This paper studies the effect of the project institution on agricultural development by exploiting Agricultural Comprehensive Development (ACD) Project. We find that project institution promotes agricultural development. We also find that central government project funds improve agricultural production conditions such as irrigation and agricultural machinery power. Central government project funds drive the increases of local government counterpart funds and other self-financing funds. However, the latter two funds hardly improve agricultural output. Moreover, by using the micro-data of industrialization project of ACD, we find that central government project funds increase the profits of agricultural enterprises, but cannot increase farmers’ income. Our study enriches understanding of the project institution.