Abstract: Scientifically and rationally demarcating urban and town areas is a fundamental task during China’s rapid urbanization stage. It serves as a critical basis for promoting the optimization and quality improvement of urban and rural spaces, scientifically coordinating urban and rural planning and construction management, and implementing territorial spatial planning. However, there is neither a unified concept nor a universal delimitation method for urban and town areas in China, hindering their planning, construction, development, and public management. Based on defining the relevant concepts of urban and town areas, this study proposed a people-centered method for determining town areas with no cities and counties set using geographic information system (GIS) technology, considering the characteristics and spatial relationships of land types. The data sources of this study include the results of the third national land resource survey, statistical bulletins, remote sensing image interpretation, and point-of-interest (POI) data. Finally, the proposed method was applied to demarcate the town areas in Xiapu County, Ningde City. The empirical study results demonstrate the effectiveness of the proposed method, which features a scientific and concise technology roadmap and strong operability. Therefore, the proposed method can provide a theoretical foundation for the rational territorial spatial planning.