In this paper, the current situations of implementation, advantages, challenges and optimization strategies for co-investment mechanism of employees in state-owned enterprises are discussed. Its connotation, characteristics and application situations in state-owned enterprises are elaborated through literature research and case analysis. It is found in the research that the co-investment mechanism of employees is with significant advantages in motivating employees, promoting enterprise innovation and optimizing governance structure, however, it is also facing such challenges as imperfect improvement and difficult risk control of co-investment mechanism in enterprises. In this paper, such suggestions as perfecting relevant systems of enterprises, optimizing system design as well as strengthening risk management and control are proposed, which could provide references for deepening reform of co-investment mechanism of employees in state-owned enterprises.