With the economic transition and changes in the urban–rural relationships, rural revitalization has become a great political concern in China. Reforming the rural land system is considered an important prerequisite for the revitalization of the countryside as the homestead transfer can provide new land utilization space for industries. This case study of the “hollow village” (villages with abandoned houses) reconstruction of Wantang in Yiwu city, which is a homestead system reforming pilot, aims at making a detailed analysis of the specific practice of homestead transfer. It analyzes the roles and functions of the local village collective organization in the reform of homestead transfer. From the capitalization on homestead value, the effect of densification of housing, and the effect of labor resource diversification of homestead transfer, this paper analyzes how the village collective uses the policy of the “hollow village reconstruction” to realize rural revitalization and farmers’ welfare. A conclusion is that the village collective’s leadership and mobilization played an indispensable role in the process of homestead system reform. Building up industry is the key factor for the village’s revitalization. It is significant not only for the use of the homestead resource but also for creating off-farm employment. Our findings also emphasize the need for bottom-up village collective initiatives to align with top-down government policy, regional resource endowments and enterprises, to achieve rural revitalization.