To cope with the impact of rice import on rice industry due to Taiwan¡¦s joining in the WTO, Agriculture and Food Agency of Agriculture Council, Executive Yuan has drawn support from farmer groups or food dealers with marketing capabilities as well as rice farmers and people engaged in seedling raising, rice processing and rice milling to set up ¡§special rice production and marketing areas¡¨ since 2005. At these areas, integrative production and marketing mechanism and branding business model are used to build a rice production and marketing system that owns competitive advantages in both domestic sales and export sales, so as to increase farmers¡¦ income. With in-depth interview and secondary data as sources, this paper uses qualitative analysis to discuss how the Fang Rong rice factory in Houpi Township of Tainan County copes with changes in external environment, and investigate its innovative transformation for the purpose of sustainable development, as well as the reasons, processes and performances of the transformation. Research results are respectively described as follows: 1. Sources of innovation: external and internal factors. The former includes Taiwan¡¦s joining in the WTO, government policy promotion, non-profit organization promotion and changes in consumers¡¦ behaviors; the latter includes senior supervisors and normal employees¡¦ awakening in the rice factory as well as farmers¡¦ arousal. 2. Innovation mode: product innovation, process innovation, method innovation and marketing innovation. ¡]1¡^Product innovation: includes breed improvement, line extension and technological innovation. ¡]2¡^Process innovation: implements source management, contract farming and SOP of rice production process, highlights securitization, rationalization and ecologization, and achieves scientific management. ¡]3¡^Method innovation: this case introduces competitive agriculture, social values and profits sharing into enterprise business ideas. ¡]4¡^Marketing innovation: combines rice industry with leisure experience. The target market changes from B2B into B2C. This case values customer relationship management, constructs diversified products, brand and packaging, exploits diversified markets and marketing channels, utilizes story marketing, and continuously gets good achievements in competitions to enhance brand awareness. 3. Benefits of innovative transformation: the innovative transformation benefits of this case include economic benefits, ecological and environmental benefits, socio-cultural benefits, quality improvement, customers¡¦ high satisfaction, high brand awareness, horizontal alliances, technological changes, as well as staff and farmers¡¦ growth. Key words: rice industry, Innovative transformation, special rice production and marketing area