As an inevitable result of the process of urbanization, peasants settled in city are an important power to influence the development of China in the twenty-first century. From "abandoning land when settling in city" to "taking land when settling in city", protection of homestead's rights and interests for peasants settled in city is an important deployments of rural land system reform at present. Based on the purpose of establishing an effective mechanism and system to protect the rights and interests of peasants settled in city, by means of interdisciplinary research, empirical analysis, comparative study and value analysis, this paper finds that peasants settled in city are the result of the change of peasants' regional mobility and living style under the background of the change of peasants' identity to professionalism and the new-type urbanization, and the homestead's rights and interests of peasants settled in city are property rights protected by law, which have strong theoretical and practical significance. The protection of homestead rights and interests is an important factor affecting peasants' willingness to settle in city and to abandon rural land rights after settled in city. Facing with such problems as imperfect system of the right to use homestead, absence of some relevant systems, lack of effective realization ways of the right to homestead, unreasonable compensation for withdrawing from homestead, and imperfect relief system, it is necessary to introduce the idea of coordinated protection, strengthen the construction of the right to use homestead and related judicial relief systems, insist on the coexistence of incentives and restrictions, and effectively protect the homestead rights and interests of peasants settled in city.