Abstract: Zhejiang Province is the 'demonstration area of common prosperity' and a pioneer in promoting new urbanization in China. With rich practical experience in in-situ urbanization, Zhejiang Province has successively put forward the concepts of 'town-based small city' and 'village-based small city'. Taking Huayuan Village, Dongyang City, the first 'village-based small city' in Zhejiang Province as an example, this paper analyzes its development characteristics in the process from village to city from the perspectives of function optimization and development path. The research shows that: the construction of 'village-based small city' is an important intersection of realizing the comprehensive connection between new urbanization and rural revitalization in Zhejiang Province, which has a good demonstration in practice. But its academic connotation needs further analysis. Huayuan Village has achieved good results in industrial development and attracting foreign population, but its urbanization construction still faces some practical problems, such as unclear overall positioning, industrial path dependence, lack of integration mechanism and so on. Based on the analysis of the development characteristics of Huayuan Village, combined with the core problems it is facing, this paper puts forward three suggestions: giving management authority, improving urban function and perfecting construction mechanism.