The One Village One Product (OVOP) policy, originating from Japan and adopted by China to address the “Three Rural Issues,” has become a significant instrument for rural vitalization. This research employs the Institutional Analysis and Development (IAD) Framework, coupled with policy cycle theory and policy instrument analysis, to dissect China’s OVOP policy implementation. Within the OVOP framework, the interplay of four policy tools—authority, resources, organization, and information—forms the foundation of policy execution. This research argues that achieving a harmonious balance between centralized decision-making and decentralized implementation depends on the strategic selection and integration of policy instruments. Empirical evidence, drawn from textual analysis and in-depth interviews, underscores the importance of these policy tools in promoting the integration of small-scale farmers into modern agriculture. Moreover, it highlights the influence of exogenous variables, such as physical conditions, community attributes, and operational rules, on policy effectiveness. This research contributes to a comprehensive understanding of OVOP policy at a broader level, providing valuable insights for policymakers seeking to address rural challenges and foster rural development. It lays the groundwork for future endeavors that could leverage quantitative data, strengthening the recommendations for China’s OVOP policy. It also offers valuable insights into the dynamics of top-down policy implementation in China, emphasizing the roles of local governance and small-scale farmers in achieving a delicate policy balance. The study ultimately aims to enhance the efficacy of policies like OVOP in promoting rural vitalization and addressing China’s “Three Rural Issues.”