Rural settlements are the main carriers of agriculture, rural areas and farmers; thus, optimizing the production and living space of rural settlements is highly significant to rural development. Taking the effective allocation of resources as the starting point, a suitability evaluation system of rural settlements, based on accessibility of production and living, was proposed in this study to provide scientific basis for the optimization of production and living space. The accessibility of production and living was measured by an improved two-step floating catchment area method, which considered proximity and availability based on the inclination of rural residents. The suitability evaluation system consisted of traditional suitability evaluation and newly proposed limiting factor identification based on the loss score proportion of suitability. Tingzu Town of Hubei Province, China, was chosen as the case study area. Based on the results of the suitability evaluation system, corresponding suggestions on rural land consolidation, industry division, as well as the layout of health care and education facilities were proposed to optimize the production and living space of rural settlements in Tingzu Town. It is found that the suitability evaluation based on accessibility of production and living is more scientific and accurate than the traditional ones which significantly overestimate production and living convenience. Moreover, the limiting factor identification can help us put forward suggestions according to local conditions and bring about the highly targeted optimization of production and living space of rural settlements.