Wooden toys are the flagship industry driving the social and economic development of Yunhe County, Zhejiang Province, and serve as Yunhe’s traditional, competitive and pillar industry. In 1994, Yunhe was awarded the title of "Hometown of Chinese Wooden Toys" by the Ministry of Agriculture of China, and further honored as "China Wooden Toy City" in 2003. The wooden toy industry of Yunhe originated in the 1970s and 1980s, with a development history of more than 30 years. Through the efforts of generations, it has initially formed an industrial cluster featured by small toys building a major industry, small products accessing a vast market, and small crafts carrying profound culture. It has become a key force for Yunhe to participate in global market competition, formed an economic model with distinctive local characteristics, and established a complete wooden toy industrial cluster. By introducing the history and current situation of Yunhe wooden toys, this paper analyzes its competitive advantages in industry, market and environment, as well as existing development problems including family-run production mode, OEM-dominated export model, weak brand awareness and low independent export capacity. On this basis, it puts forward reasonable suggestions for the industry, so as to promote the further rapid, sound, scientific and sustainable development of Yunhe wooden toy industry.