This paper introduces the basic structure of Chongqing CGE Model, on which an analysis about the impact of cultivated land reduction on Chongqing economy is based. The simulation results show that the reduction of cultivated land could bring negative effects on the planting industry, reduce the consumption and investment, and also cause the welfare loss of urban residents. Cultivated land reduction may cause the net outflow increase, promote the transforming of rural labor from agricultural sectors to nonagricultural sectors, and improve the welfare of rural residents. Reasonable land use planning should be made to reduce the negative impact of the cultivated land reduction on Chongqing economy.