Multifunctionality of urban agriculture is essential for the sustainability of both cities and urban farms, especially in Asian mega-cities exhibiting extensive urban sprawl. To maximise the multifunctionality of these farms, entrepreneurial or innovative farm diversification is important. However, there is insufficient research on this issue in developed countries. This study aims to demonstrate the existence of advanced diversified farms characterised by entrepreneurship, skilled farm management and social networks and explore their economic and social sustainability by using data from a survey of 386 farms located close to urban areas in Japan. Gaussian mixture clustering analysis revealed that only about 10% of the sample can be classified as advanced diversified farms and most of the other diversified farms do not exhibit entrepreneurial attributes. Furthermore, regression analysis revealed that advanced diversification has a positive impact not only on the economic viability of farms, but also on their social performance. These findings have significant implications for policies promoting the sustainability of urban agriculture, suggesting that a more balanced promotion of the diversification and entrepreneurial attributes of farms is crucial to building a sustainable relationship between cities and urban agriculture.