Contract farming is an effective approach for integrating small farmers into modern agriculture and serves as the dominant form for the industrialization of agriculture in China. A theoretical analytical framework for the impact of contract farming on the income of livestock farmers was constructed. Utilizing micro-survey data from 610 beef cattle farmers and employing propensity score matching, empirical tests were conducted to examine the influence of contract farming on farmers' income and its operating mechanisms. Participation in contract farming significantly enhances the income levels of livestock farmers. Both sales contracts and production management contracts significantly contribute to increased farmer income, with production management contracts having a more substantial impact. Group difference analysis reveals heterogeneous effects of contract farming on income for different groups based on factors such as farming duration, scale, and training. Farming costs and technological aspects play a significant mediating role in the relationship between contract farming and farmer income, promoting income growth through scale and technical efficiency. Farming relay has a positive regulatory role in the process of contract farming improving farmer income. Governments should actively create favorable conditions to encourage and guide the development of contract farming. Benefiting from the characteristics of farmers' resource endowment, mechanisms for profit distribution between companies and farmers should be improved. Through the "learning by doing" effect, the promotion and application of new technologies should be advanced. In contract farming, the promotion of a relay-style farming operation, with separate breeding of parent livestock and centralized breeding and fattening of offspring, is emphasized to facilitate the sustainable and high-quality development of the livestock industry.