Sustainable food production is an important foundation for a country’s development. With the accelerated pace of China’s economic development, many farmers are relocating to cities. This change in farmers’ part-time employment may lead to a shortage of agricultural labor supply and can result in insufficient food production. Therefore, the government implemented grain subsidies to promote food production. This study investigates the impact of grain subsidies on the labor supply of farm households, using panel data from fixed observations in rural China. The results show that grain subsidies increase the agricultural labor time of incompletely divided part-time farmers, especially the time spent growing food. This increase is because the members of these households are more likely to be engaged in temporary-seasonal-nonfarm work, and they can switch between nonfarm and agricultural work more easily. Moreover, this study finds that as the total amount of subsidies received by farmers increases, the effect of per-unit subsidies becomes more pronounced. These findings may provide evidence of subsidy effects and present policy implications for ensuring adequate food supply and sustainable agricultural development in the future.