China’s phenomenal growth and unprecedented urbanization are accompanied by social and environment problems such as rising inequality and rural stagnation. However, a new form of development based on Alibaba Group’s Taobao e-commerce platform, known as Taobao villages, has emerged in rural China to capitalize from e- commerce and sustain rural development. We investigate development trajectories and organizational structure of Taobao villages to better understand e-commerce and regional development in rural China, including the role of entrepreneurs, firms, and local states. We find that Taobao villages are being produced through economic restructuring and institutional change in response to shifting economic contexts. We have identified five development models of Taobao villages: production-oriented Xishan, Qiaoyun and Bainiu models, and market-oriented Beishan and Qingyanliu models. We also find that local states and ICT (information and communication technology) firms have played an important role in facilitating the development of Taobao villages. Taobao villages have to work closely with their local and external networks to upgrade technology, enhance innovation, and increase added value. Local contexts and spatial networking are essential to the development of Taobao villages. As a new form of regional development, Taobao villages may provide a pathway to economic development for rural areas in other developing countries.