Gully erosion damages land resources and is one of the most significant sources of sediment to streams. The purpose of this paper is to investigate the dynamics of gully development and its primary influencing factors on the loess plateau, China. Thirty small catchments were selected from Caijiachuan basin on the eastern hilly loess plateau in western Shanxi province to compare gully development (changes of the area and perimeter of the valley region from 2003 to 2010), based on high-resolution remote sensing data (QuickBird image) and GIS. The results showed that the rate of valley area increased change from 0.12% to 1.30% per year and the rate of valley perimeter increases by between −0.89% and 1.28% per year, sidewall erosion occurs in our study area, except gully headward erosion. Pearson correlation analysis indicated that topographic factors are the main factors inducing bank gully development for catchments with lower vegetation coverage in the inter-valley area. Vegetation coverage exceeding 60% in the inter-valley area can significantly reduce gully processes. Gullies developed most rapidly in catchments with multiple land use of farmland, grassland and forestland, compared with those dominated by grassland and forestland .