1949年新疆和平解放时，当地经济是以农牧业为主体的自然经济，生产力水平低下，生产方式落后，发展处于停滞状态，人民生活贫苦不堪。为巩固边防、加快发展，减轻新疆当地政府和各族人民的经济负担，1950年1月，驻新疆人民解放军将主要力量投入到生产建设之中，当年实现粮食大部分自给、食油蔬菜全部自给。1953年，新疆军区将所属部队整编为国防部队和生产部队两个部分，其中生产部队建有军垦农牧团场43个，拥有耕地77.26千公顷。同时还兴办工业、交通、建筑、商业企业和科技、教育、文化、卫生等事业单位，为之后组建生产建设兵团奠定了基础。

　　1954年10月，中央政府命令驻新疆人民解放军第二、第六军大部，第五军大部，第二十二兵团全部，集体就地转业，脱离国防部队序列，组建“中国人民解放军新疆军区生产建设兵团”，接受新疆军区和中共中央新疆分局双重领导，其使命是劳武结合、屯垦戍边。兵团由此开始正规化国营农牧团场的建设，由原军队自给性生产转为企业化生产，并正式纳入国家计划。当时，兵团总人口17.55万。此后，全国各地大批优秀青壮年、复转军人、知识分子、科技人员加入兵团行列，投身新疆建设。从1956年5月起，兵团受国家农垦部和新疆维吾尔自治区双重领导。

When Xinjiang was peacefully liberated in 1949, the region featured a natural economy, with farming and animal husbandry as the mainstay. Productivity was low and the mode of production was backward. Development was stalled and local residents lived in poverty. Aiming to consolidate border defense, accelerate Xinjiang's development, and reduce the economic burden on the local government and local residents of all ethnic groups, in January 1950 the People's Liberation Army (PLA) units stationed in Xinjiang started focusing their efforts on production and construction. By the end of that year they had become largely self-sufficient in grains and fully self-sufficient in edible oil and vegetables. In 1953 the Xinjiang Military District reorganized its troops into two divisions: defense troops and production troops. The latter had 43 regimental agricultural and stock raising farms and 77,260 hectares of farmland. The production troops also set up industrial, transport, construction, and commercial enterprises, as well as public institutions of science and technology, education, health, and culture, so paving the way for the founding of the Production and Construction Corps.

In October 1954 the central government ordered the demobilization of most of the PLA Second, Fifth, and Sixth Armies and all of the 22nd Army Group in Xinjiang, and their separation from the setups of the national defense forces to form the Production and Construction Corps of the Xinjiang Military District of the PLA, subject to the dual leadership of the Xinjiang Military District and the Xinjiang Sub-bureau of the Central Committee of the Communist Party of China. The XPCC's missions were to carry out both production and militia duties, and to cultivate and guard the border areas. Henceforth the XPCC officially commenced its building of state-run agricultural and stock raising farms, and transformed from military self-sufficient production to production as an enterprise, incorporated into national planning. The XPCC had an initial population of 175,500, later swelled by large numbers of youth, demobilized military personnel, intellectuals, scientists, and technicians. As of May 1956 the XPCC was subordinated to the dual leadership of the Ministry of Land Reclamation and Xinjiang Uyghur Autonomous Region.