This paper intends to study the urban canal system in ancient China in several important aspects , e.g. the waterways inf1uence on site selection of cities , the planning and construction of urban canal systems , the types of the layouts and the features of ancient water cities , etc. Ten major functions of urban canal systems are summarized , including water supply , waterbome transportation , irrigation and aquaculture , military defense , draining of floods and waste water , flood storage and mitigation , fire fighting , ship sheltering , landscaping and recreations , as well as environment tempering. The paper provides rich examples to demonstrate the significant role that urban canal systems play in stabilizing urban sites , promoting industry and commerce development ,and improving living environment. By citing typical cases both at home and abroad , the author shows his disapproval of the destruction of urban canal systems in the course of modem urbanization , and emphasizes that urban canal system is one of the most important embodiments of a city. It is concluded that the existing urban canal systems should be well conserved so as to present unique urban outlooks characterized by both tradition and modemity.