The deepening division of labor in China's agricultural sector is increasingly characterized, but the limitations of land parcel decentralization have come to the fore, stunting the income-generating effects of the division of labor. Based on the theory of division of labor in agriculture, constructing the theoretical logical framework of "horizontal division of labor - deepening of division of labor - economic efficiency". Using survey data from 1,079 farm households in Liaoning Province in 2021, the impact of spatially contiguous land transfer on the structure of farm household income and its mechanism of action under the perspective of horizontal division of labor were examined. The results show that the horizontal division of labor, driven by spatial proximity, is effective in increasing agricultural incomes, thereby "pulling" on the overall level of household incomes and exploiting economies of scale. Further analysis of the mechanism reveals that, in the process of deepening the horizontal division of labor, the degree of production specialization "amplifies" the income-generating effects of scaling up. Heterogeneity analyses show that groups of farmers with high soil quality and low levels of parturition are more likely to benefit from the economic effects of the process of deepening the horizontal division of labor than other farmers. Therefore, government departments at all levels should actively encourage and guide various forms of land clustering in the region, enhance the advantages of regional scale, cultivate farmers' awareness and initiative of specialized production, and guarantee farmers' long-term stable and sustainable income.