Abstract: At present, China is still on the rapid urbanization. However, it has to face the trends of urban shrinking, especially in the villages and towns in the central and western regions, which are facing more serious difficulties such as population shrinking and slow economic development. Taking Baogai Town, in Hengnan County, Hunan Province as an example, this paper analyzes the recession based on the previous rapid growth. The dynamic mechanism of urban shrinking and transformation at present, as well as the external factors are reflected in the macro external policy guidance and the transformation of resource factors. And the internal driving factors are reflected in the transformation of farmers' production and life style and the transfer of local farmers. In order to realize the smart shrinking trend, Baogai Town needs to carry out the smart reconstruction of the overall pattern and the aggregation and transformation of industrial functions, renovate and repair land resources, and strengthen the active utilization of idle land, so as to orderly optimize the urban spatial layout and improve the quality of urban living environment.