The production of public goods like amenity value of the landscape, food security, preservation of rural communities and rural lifestyle, by agricultural sector is a subject that has been widely accepted by experts. However, in many policies and political analyses carried out, solely the production of private goods by the agricultural sector is paid attention and the important function of public goods production is ignored. Given the importance of multifunctional debate of agriculture in policies analysis, this study examined the effect of agricultural multifunctionality in the simulation of the agricultural production subsidies reduction effects using Computable General Equilibrium (CGE) model. Simulation results of the effects of agricultural production subsidies reduction in terms of the multifunctionality showed that current practices to support the agricultural sector is non-optimal according to agricultural production and welfare reduction and the optimal level of supports with and without multifunctional agriculture is different. The simulation results showed that the welfare effects of economic reforms in Iran in the agricultural sector in terms of the multifunctionality will be positive. This is on condition that the welfare effects of agricultural reform in terms of the multifunctionality of agriculture are negative.