Domestic land grabbing is defined as the process of land expropriation and displacement put in place by governments within their country borders to supposedly enhance development. While development-induced displacement occurs all over the world, China is responsible for a large fraction of such type of displacement and resettlement projects. Drawing on a case study from a rural island in east China, this paper analyses the impacts of displacement and resettlement projects in relation to: land tenure rights and compensation measures; rural workers’ livelihoods and the hukou registration system; and environmental degradation. Results reveal that landless people and rural areas in general are facing the risk of unemployment, food insecurity, the mismanagement of resettlements and environmental degradation. The paper argues that under such circumstances, it is very difficult to view the urbanisation strategy and resettlement policy of China as a good opportunity to improve development.