The usufruct of housing sites of China, which is a unique usufruct resulting from a land policy of ensuring the living of inhabitants in rural areas, means a kind of right to construct housing and ancillary facilities in housing sites and to retain the usufruct of them. Since the usufruct of housing sites has a dual character of property right and membership right and its living ensuring aim as well, the free disposal of this right has been limiting under existing laws. In recent years, however, the existing system of usufruct has failed to satisfy the rapid economic and social development because of the economic reform and the relaxation of household registration system, particularly the flow of labor force between urban and rural areas. It is to be regretted that there are not definite regulations laid down for the transferability of rural land under newly promulgated Property Law of the People`s Republic of China. Whether the usufruct of housing sites can be disposed freely has become a hot topic. Despite the courts held a negative attitude towards free disposal of the right, the problem is not entirely settled. This paper, therefore, aims to provide a possible solution to this hot controversy. First of all, an introduction to the development process and characteristics of the usufruct is present. Then, the second part will follow, which concerns the subjects of the right and the exercise methods. As the most important part of this paper, the third part deals with the controversy over whether the usufruct of housing sites can be disposed freely. Finally, the rea- sonable proposals for improving the usufruct system are put forward.