By investigating urbanization process of a typical village in Xinyang City, Henan Province, urbanization response characteristics and driving mechanism of underdeveloped hilly area were explored from the perspectives of population, economy, landscape and society. The results showed that reform of government macro-policy is a fundamental driving force for the urbanization of underdeveloped hilly area in central China which then is co-promoted by economic development and social needs. During the urbanization, rural population is transferred locally or to the neighboring areas, traditional agriculture is gradually transferred to professional and characteristic agriculture. Non-agricultural economy has become a major income source of the locals, and also a major force for shaping rural economic spaces and natural landscapes, leading to the binary landscape layout of village. Weights of environment and traffic are improved in selecting relocation site for rural households, traditional affinity and neighborhood relationship is weakened, spatial differentiation of social and economic structures in the village is enhanced, which are all new tokens of the villagers’ values and life concepts, and will lead to the further urbanization.