This study examined the characteristics of rural business growth in hilly and mountainous areas by focusing on areas falling within the old municipalities of Shimane, Wakayama, Kochi and Oita Prefectures. Using the Malmquist Index method for data obtained by the output-oriented data envelopment analysis model, we examined farm productivity from 2000 to 2010 in terms of human capital, activities and output in farming. The results confirmed that farm productivity changed primarily in the context of processing of agricultural products, running guest houses and direct selling of farm products by farm households. Further, many municipalities began performing increasingly popular agricultural activities during the period. The results also clarify that competition and cooperation among farmers, diversity of farmers and change in agricultural employment play important roles in rural business management in hilly and mountainous areas. JEL Classification: Q01, Q13, R11