Based on the comprehensive investigation of loess plateau 19 counties in northern Shaanxi, the development of rural settlements and their soil erosion were discussed by means of fixed-point observation, typical area investigation and quantitative analysis. The main research results of this paper are as follows: For the first time, the development history of cave settlements is divided into stages. This paper analyzes the types, spatial distribution, land use characteristics and development trend of rural settlements. This paper discusses the basic characteristics of water erosion in rural settlements from three aspects: runoff, sediment and sediment granularity, and puts forward the critical value of secondary precipitation when surface runoff increases sharply. The soil erosion caused by cave collapse in rural settlements in sandy and coarse areas of northern Shaanxi was quantitatively analyzed. This paper makes a comprehensive and quantitative analysis of soil erosion in the process of building houses in rural residential areas, and points out that rural residential areas in sandy and coarse areas in northern Shaanxi produce a large number of excavation faces and loose soil when building caves, which leads to strong erosion. The total erosion amount of rural residential areas in sandy and coarse areas of northern Shaanxi can reach 32 million t/a, and collapse erosion and kiln building erosion account for 90% of the total soil erosion of rural residential areas, which has become the most important way of soil erosion in rural residential areas. The interactive relationship between rural settlement development and soil erosion is analyzed and summarized. It is pointed out that during the development of rural settlements, serious soil erosion has occurred, which has harmed the settlement environment and security, forced people to continuously improve the cave structure, and finally led to the abandonment and migration of settlements. Finally, the prevention and control countermeasures of soil erosion in rural residential areas are put forward, that is, prevention first, combination of prevention and control, fortification against harm and comprehensive management.