Pointing at the characteristics of high-frequency, small-volume,low-priced, multi-principal, and complicated modes of agricultural water rights transactions in China, and the initial water rights at the grassroots level are ambiguous, the transaction mode selection is blind, and the roles of the government and the irrigation subject are inverted, all of which increase the transaction costs of China’s agricultural water rights market. Based on the water rights trading data of 5 612 single irrigation water users from 2017-2022 on the platform of China Water Rights Exchange and interviews with the pilot counties, this paper further analyzes the dilemma of lagging development of China’s current agricultural water rights market and the policy focus point on the basis of sorting out the role of agricultural water rights trading on the basis of the path of advancing the modernization of agriculture. We finds that agricultural water rights trading can help agricultural modernization by improving the modernization of industrial factors, industrial structure, production mode and management. Based on this, this paper proposes to establish a local system for determining the initial agricultural water right and a screening mechanism for the transaction mode according to the regional water resource endowment and water use characteristics, and vigorously explore the “market adjustment+government intervention” agricultural water right transaction mechanism with Chinese characteristics.