This article empirically evaluates whether the adoption of market mechanisms such as auction, tender and quotation for land-use rights acquisition effectively reduces illegal land use in China. It is based on official statistics of (i) illegal land use cases and areas; and (ii) adoption rate of market-led transactions in 30 provinces from 1999 to 2008. A fixed effects panel model is used to control for factors like land revenue dependency, law enforcement, per capita gross domestic product, government size, real estate investment, relative wage in public sector and citizens’ level of education. The findings demonstrate that the market mechanism is effective in reducing illegal land use. However, the Chinese government needs to close legal and institutional loopholes in the land administration regime in order to improve the effectiveness of market-led transactions in reducing land corruption.