Numerous innovative approaches to mitigate effects of excessive emission of greenhouse gases (GHGs) on global climate change are being proposed and formulated. Sequestering carbon to terrestrial ecosystems represents one of the important clean development mechanisms. Reforestation through converting various non-forest lands to forests is undoubtedly an important dimension of carbon sequestration. Using Liping County in Guizhou Province as a case region, this study examines the perceived change in social and economic livelihoods of peasants and the factors responsible for the variations in the changes. The results of the study reveal that socio-economic changes associated with the government-financed project are multifaceted and profound. Because of the financial subsidies provided by the central government, this environmental action in many aspects can be regarded as a poverty reduction measure in the underdeveloped area where rural poverty is widespread. A majority of peasant households have benefited from project participation. The land conversion project with continued financial support also contributes to the social transformations of traditional rural society in remote areas to a more mobile, less subsistence agriculture-based, and open society.