The landuse classification charts in 1997 and 2004 are acquired by means of the remote sensing,GIS, and supervised classification methods for the hilly and gully area (Baota district) in Yan’an. Combined with the local DEM (digital elevation model) slope data, an analysis is made of the landuse distribution variation and differentiation with the data of the slope farmland, slope woodland, slope pasture and slope orchard for the years of 1997 and 2004, respectively. The results show that: (1) During the six years from 1997 to 2003, farmland decreased by 33.1%, woodland increased by 10.1%, pasture increased by 20.6%, orchard increased by 33.3% and the ecological environment of the studied area is improved generally. (2) The slope farmland decrease is mostly obvious, with the 55.5% of decrease occurred in the area of >35° and 51.2% in 25° to 35°. The decreased slope farmland was mainly converted into slope woodland, slope orchard, and mostly the slope pasture. However, the proportion of the irrigable farmland to total farmlands increased while the total farmland decreased. Analysis shows that the preliminary achievements are attributed to the execution of the government’s forestation project.