Land degradation through environmental pollution represents a serious threat to vulnerable populations in rural China. To better understand farmers' perceptions of land degradation and their corresponding adaptation behaviour, this paper presents a theoretical framework to explain the interactions among awareness, perception, mitigation, and adaptation, and tests the framework using a case‐study. A case‐study was conducted in Qinghai, where historical environmental pollution from a chemical plant had caused the contamination of soil, groundwater, and river water, which had negatively impacted the livelihood of local farmers. A questionnaire survey was conducted (n = 277), and the results were used to test the theoretical framework using structural equation modelling. Results indicated strong structural relationships between awareness and perceptions (r = .75, p < .01), a relatively strong relationship between mitigation and adaptation (r = .63, p = .02), and a weak relationship between perception and mitigation (r = .20, p = .54). The study results suggested that farmers were well aware of land degradation issues, but they lacked in‐depth knowledge about the situation and about sophisticated adaptation methods; therefore, they had chosen the easiest adaptation strategy‐ to avoid the degraded land. The farmers were less willing to bear significant financial costs in adaptation; however, the proportion of respondents adopting ‘moving’ as an adaptation strategy was relatively high, suggesting that farmland degradation in combination with employment opportunities in urban areas may be causing environmental displacement and accelerating urbanization. The authors of this paper recommend that policymakers should consider more than just technical factors in addressing China's environmental pollution and land degradation problems. The socio‐economic status of farmers should be a critical component in the equation, and bottom‐up empowerment adaptation behaviour should be used in combination with top‐down mitigation.