Abstract: Small towns, possessing cultural and ecological advantages, serve as bridges between cities and villages, supporting a large population and playing a prominent role in grassroots governance. Based on an analysis and field investigation of Guangdong and Hubei Provinces, it is found that the construction of small towns has its own foundational conditions and driving forces, and its development also exhibits phased patterns. Some small towns have taken the lead in entering the stage of stock renewal or experiencing population inflow. By improving the organizational guarantee mechanism, implementing policies tailored to local conditions, leveraging the role of town areas as carriers, and innovating the factor guarantee mechanism, the two provinces have effectively promoted the construction and functional improvement of small towns, achieving positive results in building small towns that are livable, suitable for industry, and distinctive in character. However, the investigation still revealed problems such as a lack of factors, industries, management, and maintenance, which may impact the sustainable development of small towns. Therefore, this paper puts forward relevant policy suggestions for the further development of small towns according to local conditions. The construction of small towns should not solely focus on economic accounts but also consider political and livelihood accounts, improving the comprehensive service capacity of small towns and continually meeting the needs of the people for high-quality lives.