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The optimization of rural land-use through land consolidation has become an indispensable part of reform in China, significantly impacting rural settlements and their residents. Given the growing social problems due to land consolidation, this study proposes a new land consolidation approach that involves helping rural residents relocate from small settlements to vacant properties in large settlements through a homestead exchange mechanism. We argue that this targeted approach can achieve land-use optimization, without the negative impacts of the conventional approach to land consolidation. To evaluate our idea empirically, we conducted a case study in Jilin Province. The simulation estimated that our approach could increase the effective amount of arable land by 1046.66 km2 and the average size of rural settlements by 51.9%, while decreasing the number of rural settlements by 44.6%. Therefore, our approach can achieve the objective of land-use optimization, despite the highly complex context and varying degrees of rural fragmentation and hollowing. • Land consolidation is an important policy to achieve rural land-use optimization. • A new approach to land consolidation that is less disruptive is proposed. • The approach is based on a voluntary homestead exchange mechanism. • Assist rural residents to relocate from small settlements to large settlements. • Simulation shows that approach can achieve the objective of land-use optimization. [ABSTRACT FROM AUTHOR]