Abstract: Building on an extensive Lougang water network, the water town group of South Taihu Lake area has evolved over thousands of years and gradually formed an urban-rural spatial settlement system with distinct regional characteristics, namely an orderly "city, town and village" hierarchy, with both interdependence and clear division of labor. This paper investigates the specific formation dynamic mechanism of the water town group's spatial system from the aspects of natural geography, politics, military, industrial growth, and transportation modes. The paper concludes the general trend of the development of the water-town-group of South Taihu Lake will follow a "multi-centralization, networking and specialization" pattern in the era of ecological civilization, and puts forward planning strategies and recommendations for its ecological landscape pattern, characteristic industrial development and urban-rural transportation network.