Abstract: 【Objective】 To find out the input-output efficiency of family farms and formulate targeted measures for their future development. 【Methods】The survey data from 79 family farms in 14 prefecture-level cities in Shandong Province was used and a three-stage DEA analysis method was adopted to analyze the production efficiency of grainbased family farms in Shandong Province.【Results】Upon the SFA-like regression analysis, the effects of environmental factors and random disturbances on the production efficiency of family farms were removed. Compared with the first phase, the average total technical efficiency value of family farms in the 14 cities increased from 0.815 to 0.862 and the pure technical efficiency value increased from 0.877 to 0.962, while the returns to scale decreased from 0.923 to 0.895. Among the environmental factors, the rural residents’ disposable income had a negative impact on the production efficiency of the family farms while farmers’ education level had a positive effect, and the fiscal policies played an insignificant role. 【Conclusions】The environmental factors and random factors do have an impact on the production efficiency of family farms. Therefore, such external influences shall be removed from efficiency estimate. According to the impact of environmental factors on the development of family farms, the government should guide farmers to make correct investments, increase financial support, strengthen farmers’ training, and improve the construction of agricultural socialized service systems.