The standard labor supply theory believes that an increase in non-labor income will reduce labor supply, however, a large number of domestic and foreign empirical studies are controversial on this point of view. In order to deal with the above controversy, this study appropriately extends the standard theory. By examining the effect of non-labor income on the marginal labor supply, the study claims that although non-labor income has a direct effect on reducing labor time, whilst it can enhance the wage rate on labor supply. The substitution effect indirectly increases the supply of labor time. The net effect of the two determines the true effect of non-labor income on labor supply. Thus, the reason why non-labor income has a positive effect on labor supply is that non-labor income squeezes part of the enjoyable leisure time and increases the price of leisure, thereby strengthening the substitution effect of people reducing leisure time and increasing the labor supply. Using the data of Chinese General Social Survey , this study confi rms the view above. The positive effect of non-labor income on labor supply has provided a new policy tool for China to cope with the current labor supply shortage, i.e. the government, without touching on rigid systems such as the wage system and holiday system, can activate the labor supply by regulating the different types and forms of non-labor supply