Abstract: Forest carbon sequestration market as an effective mechanism to solve the benefit compensation of forest ecological system, has been initially established in the international scope since the Kyoto Protocol has come into effect. First, this paper reveals that the defined property of forest carbon sequestration is the precondition of carbon sequestration trade and the foundation of effective operation of the forest carbon sequestration market. Secondly, under the supply and demand framework of developing countries and Annex I countries, this study builds the operating mechanism of the forest carbon sequestration market from aspect of the effectiveness of resource allocation. Finally, we discuss the functions of government in building and perfecting of the mechanism of the forest carbon sequestration market.