Ancient Chinese urban planning encompasses the diverse set of cultural beliefs, social and economic structures, and technological capacities that influenced urban design in the early period of Chinese civilization. Factors that have shaped the development of Chinese urbanism include: fengshui, and astronomy; the well-field system; the cosmological belief that Heaven is round, and the Earth is square, the concept of qi (气; 氣); political power shared between a ruling house and educated advisers; the holy place bo; a three-tiered economic system under state control; early writing; and the walled capital city as a diagram of political power.

Urban planning originated during the urbanization of the Yellow River valley in the Neolithic Age, which began in China around 10,000 B.C. and concluded with the introduction of metallurgy about 8,000 years later, was characterized by the development of settled communities that relied primarily on farming and domesticated animals rather than hunting and gathering. The process in China, as elsewhere in the world, is related to the process of centralizing power in a political state. Although several cultures formed competing states, the direct ancestor of the Chinese state was Longshan culture. Therefore, the earliest Chinese urban planning was a synthesis of Longshan traditional cosmology, geomancy, astrology, and numerology. This synthesis generated a diagram of the cosmos, which placed man, state, nature, and heaven in harmony. The city was planned in the context of this cosmic diagram to maintain harmony and balance.

Urbanization begins at Banpo (4,800–3,750 BC) on the Zhongyuan plain of the Yellow River. Banpo grew from a typical Yangshao village in both size and organization until the construction of the Great Hall ca. 4000 BC. Like Eridu in Mesopotamia, Banpo in East Asia was the first instance of specialized architecture, something other than a house. Physically, Banpo was composed of 200 round pit-houses and the Great Hall across 5 hectares and surrounded by a ditch. These pit houses were sited for solar gain by aligning the door to the Yingshi (营室; 營室; yíngshì, or simply shi 室) asterism just after the winter solstice. Already, at this early stage the principle of south-facing entry was firmly established.

As in other Neolithic communities, life at Banpo was synchronized to the agricultural year, which was timed by the movement of the Big Dipper, which functioned as a celestial clock. The Classic of Poetry describes this annual cycle. Beginning in spring, adolescents swam through the flood waters at the triangular confluence of two rivers. They emerged shivering, and in this state they were infused with the souls of ancestors buried in the earth who had reemerged at the springs of the Yellow River. In this energized state, they procreated in a location deemed to possess magical earth energy. These locations were unsuitable for agriculture, usually a hill, and therefore were uncleared primeval forests. Consecrated procreation was essential to maintaining the cycle of life. When the flood waters receded, the triangle was divided into fields between the families. In autumn there was a large festival at the completion of the harvest. In winter, the men left their homes and retired to the Great Hall, where they were led by the village elders in drinking and singing to repel the cold.

The needs and beliefs of Banpo society contributed significantly to the development of the early Chinese urban form. Sacred procreation sites from the springtime rituals eventually became known as the Holy Place, referred to as bo (verify spelling). Additionally, the concept of the relationship between ancestors, the earth, and fertility laid the groundwork for the theory of qi energy and fengshui geomancy. This idea is elaborated in the Book of Burial, which describes the notion of qi (气; 氣, literally 'vital energy' or 'atmosphere') as a fundamental force. In this theory, humans are seen as concentrated qi, and when their bones are returned to the earth, they are re-energized by qi. The descendants of the deceased are affected by the qi generated from the bones of their ancestors, similar to how the vibration of one lute string can influence another nearby string.

This philosophy suggests that the world is an active matrix of qi, and for harmony to be maintained, graves, houses, and cities must be carefully positioned according to fengshui principles. The cosmological model that guided this idea described the world as having a round heaven and a square earth. This cosmological view, known as gaitian cosmology (盖天说; 蓋天說, literally 'canopy-heavens theory'), originated from Neolithic Chinese astronomy. The cosmic diagram is often depicted on jade bi (a flat disc) and cong (a cylindrical object), which were used to communicate with sky and earth spirits, respectively. In particular, Yangshao pottery decorated with a pattern representing the Big Dipper on a nine-in-one square (earth) surrounded by a circle (heaven) illustrates a cosmological worldview of earth divided into nine parts. Over time, this model of the nine-in-one square served as the basis for the well-field system, a fundamental and geometric concept used in urban planning. Similarly, the design of the Great Hall would later serve as a model for the palaces and imperial cities of China. Longshan Culture (3000–2000 BC) arrived from the east one thousand years after Banpo in the same area. This arrival is mythologized by the story of the Yellow Emperor, a man of vigorous energy who dispensed law, standardized measures, invented writing, and conquered. The Longshan tribes formed a superstratum over Yangshao culture. As they fused ideologically and socially, all the elements of a new state and civilization appeared. Culturally, protowriting in the form of the Longshan Script was used on oracle bones. Politically, a Longshan warlord ruled with the help of a Yangshao adviser. Both the use of oracle bones, and the rule of a king with adviser, had continuity into the Shang dynasty. The first capital was Chengziya in 2500 BC, followed by Taosi in 2300 BC and finally by Erlitou in 2000 BC. Longshan Culture developed directly into the Xia and Shang dynasties.

The hierarchical and militaristic aspects of Longshan culture are evident in their cities. Their shape is a walled square filled with square houses. The transition from round to square homes is always accompanied by centralizing power in history. The square shaped city, itself a product of centralized power, historically arises from a military encampment. It is the city as a diagram of political power. The new order made its mark on the Urban-Regional context. Three levels of settlement emerged in the early Longshan state, village called Jū (0–1 ha), city Yi (1–5 ha), and capital called Dū (<5 ha). These three tiers of settlements are the physical realization of central place theory. The original Yangshao Jū villages formed a matrix of production that channeled goods upward to larger Longshan Yi and ultimately to the Dū. Political power was therefore defined as the amount of the highly productive matrix of agriculture and villages under control. The greater the area, the more wealth passed upwards to the capital. Other cities were economically unnecessary, as there were neither long-distance trade nor markets.

The final Longshan capital, Erlitou is the physical manifestation of massive social change in China c 2000 BC. Erlitou began in the Neolithic as a Yangshao bo, with later additions of altars and temples. It was a sacred city, even when absorbed by the Longshan tribes, and thus was never walled. Erlitou was the site of transition into the Bronze Age. The legendary Xia dynasty may have been the ruling class of Erlitou.