Abstract: Since the market-oriented reform of crop seed industry began in 2000, institutions, personnel and management responsibilities had been constantly adjusted and changed from top to bottom. However, until now, there were still three practical dilemas: mismatching of seed industry status and management organization setting, mismatching of management organization and responsibility undertaking, and unmatching of management team and responsibility undertaking. These problems reflected the deeper problems of crop seed industry management whether to exist, how to exist, needed to reflect on the reform of crop seed industry institutions from the perspective of economics. The theoretical basis of government management under market economy was market failure. There were market failure factors such as monopoly, externality and information asymmetry in crop seed industry, so it was necessary to make up for the efficiency loss caused by market failure through scientific government management functions. The functions of crop seed industry management institutions needed to be reorganized to serve both ends of supply and demand, adhere to the direction of market-oriented resource allocation, guide consumers and producers to rational behavior through information services, and purify and standardize the crop seed industry market through strict management of source operation behavior, strict management of small enterprises, strict management of grassroots streets and fields.