The household registration system is related to the basic rights of individual citizens and the efiective allocation of labor resources. China's urban-rural separation household registration system is an important reason why rural surplus labor cannot be transferred to cities and towns in a timely manner, resulting in low agricultural labor productivity. Since the reform and opening up, China has been carrying out the reform on the household registration system, however, the progress has not been smooth, which is related to misunderstandings of some people. To this end, the current study conducts economic analysis on the reform of the household registration system, and then explores its path of reform. The researchers think that urbanization is driven by interests, whilst the household registration system is not an effective policy tool to limit the scale of cities and towns; migrant workers living in cities will create demand for themselves in the urban labor market to achieve full employment, which is the Say's law of the labor market; the key to the reform of the household registration system is to realize the unification of the place where a person makes contributions and the place where he receives public services, which essentially reflects the unity of the local government's acceptance of taxes and public services; and the reform of the household registration system must be led and directed by the central government while the household registration system must be legalized.