Agricultural zoning is a measure used to sustain the orderly growth of agriculture and preserve prime farmland. However, research on the proclamation effects of actual economic impact and zoning effectiveness during policy transition is rare. This paper provides the first empirical evidence of the agricultural zoning effect on farmland use under policy change and the proposed amendatory Factory Management Act using the unique case of Taiwan. We apply a fixed-effects panel regression to explore the zoning effectiveness on farmland use with repeated cross-sectional zoning and rice fields data from a combination of geographic and management information systems in 2015 and 2017. It turns out that there is an apparent reduction in paddy fields within common agricultural zones of about 5.2 ha on a village basis, suggesting that the zoning policy did not achieve the aim of farmland conservation. Before the new zoning map takes effect, farmland loss could total more than 75,000 ha. The significant adverse impacts of the industrial workforce, land price of industrial zones, and relative price ratios of industrial and residential verse agricultural zones on farmland use may reveal the intense competing interests and land use between industries. Our findings also show that the entire farming workforce is still aging and less educated, which is detrimental to improving sustainable farming development. Strict law enforcement and consistent policy are required to correct these distortions of farmland.