This thesis investigates the determinants of urbanization in post‐reform China, paying particular attention to its institutional arrangements, among which the household registration system (Hukou) and local governments’ manipulation of the land market figure prominently. Urbanization addressed in this thesis refers not only to the increase of residents in urban areas, but also more broadly to the process through which production factors, especially the rural workers, are reallocated toward the non‐agrarian economic activities. Both the Hukou system and the local governments’ manipulation of the land market are Chinese characteristic, and are consequently believed to have produced significant effects on post‐reform China’s economic development in general and in its urbanization in particular. Based on a sound understanding of the nature, the origin and the evolution of these institutional arrangements, and their effects on the allocation of production factors and the price system in urban areas as well, this thesis provides a quantitative analysis of what and how these effects are. Examining the institutions in detail, we argue, theoretically, that II urbanization is profoundly shaped by the individual household and government choices in response to the institutions. For the remarkable urbanization process in China took off only since the middle of the 1990s, historically following the failure of the town‐village enterprise, we use panel data during 1997 – 2009 to test the theory and find that the above‐mentioned institutions have significantly affected the pace of urbanization, a result that is well in accordance with the theoretical prediction.