The precipitation pattern in the Taihu Lake basin in East China has significantly changed over the last decades, perhaps due to intensive urbanization. However, there is limited understanding of the effect of large-scale expansion of city groups on the precipitation variability, which causes a challenge for flood control in the basin. Considering the process of urbanization, we investigated in this study the variability of precipitation in different urban zones and characteristic scales and explored the influence of urban development on the rain island effect in the basin. The basin was divided into three zones (old urban area, new urban area, and suburbs) considering different degrees of urbanization. Results indicated that precipitation change and its response to urbanization had spatial differences at various characteristic scales. Urbanization exhibited a significant “precipitation enhancement effect” at the characteristic scales including annual, flood season, summer, autumn, and winter but indicated a “precipitation reduction effect” in spring. Annual (flood season) precipitation in 1990–2013 increased by 30.04 mm (16.94 mm), due to urbanization, compared with that in the preceding period. The rate of contribution of urbanization to precipitation increase was 15.6%, 41.1%, and 14.4% in summer, autumn, and winter. The enhancement effect of short duration rainfall extremes in old urban area was also discernible, and that in new urban areas would enhance along with urban expansion, complicating urban flood and waterlogging control. More effective adaptation strategies should be implemented to handle the unfavorable situation.