Abstract: Based on the 1998-2011 time series data of the urbanization level and the income of farmers and herdsmen in Inner Mongolia, Using gray correlation analysis method, the impact of the level of urbanization on income of farmers and herdsmen in Inner Mongolia was analyzed in the article, The results showed that significant correlation between urbanization level and the income of farmers and herdsmen, Correlation degree weakened orderly of the urbanization level with farmers and herdsmen household business income, wages income, property income and transfer income, On the basis of the study, the countermeasure and advices on improve urbanization and increasing in farmers and herdsmen income were put out.