Taking China-ASEAN Free Trade Area (CAFTA) as an example, this paper examines the impact of free trade agreement on labor income share. Taking the implementation of CAFTA as a“quasi natural experiment”, this paper establishes a double difference model. Then we match the Chinese industrial enterprises data and customs data from 2000 to 2007, and empirically test the effect of free trade agreement on labor income share. The results show that the CAFTA has significantly increased the labor income share of Chinese enterprises, and this effect is different in different industries in terms of factor intensity, industry concentration and enterprise ownership types. The influence mechanism test results show that the CAFTA has both“labor remuneration effect”and “productivity effect”on labor income share. On the one hand, the CAFTA increases labor income share by improving enterprises’average labor remuneration. On the other hand, it increases labor income share by restraining enterprises’labor productivity and reducing their capital bias of technological progress. The research provides new evidence for the factor income distribution effect of free trade agreements, and also provides policy inspiration for promoting the construction of China’s regional free trade areas.