Abstract: The protection of historical towns in mountainous areas is affected by natural and social factors, and is often difficult to implement effectively. Therefore, Shaxi Ancient Town, which has effective conservation practices, was selected to analyze and summarize its evolution from both spatial and functional aspects. Firstly, the Spatial Syntax was used to analyze the spatial morphological evolution characteristics of the market town. Secondly, the functional evolution characteristics were analyzed by Kernel Density Estimation. Thirdly, compared with the land layout of relevant plans, the dynamic mechanism of the spatial evolution of Shaxi was summarized. Finally, the following conclusions were obtained: 1) Since the 21st century, the spatial evolution of Shaxi Ancient Town has three stage characteristics. 2) The spatial morphological changes of Shaxi Ancient Town reflect the trend from single-core agglomeration to dual-core expansion and then to plain area integration. 3) The function change of Shaxi Ancient Town lags behind the change of spatial form, and the diversification of land functions in the newly built town should be promoted, so that the function and space can develop in harmony.