Nowadays, China’s rapid urbanization is accompanied by emerging problems of nonsustainability, as a challenge to global sustainable development. Our research addresses the complicated relationship between urbanization and sustainability in China. First, we establish the Kuznets-curve hypothesis of urbanization and test its reliability based on evidence from China’s urbanization, and the result shows that a win–win situation between urbanization and sustainability can possibly be achieved in China. Second, faced with an unbalanced urbanization trend in China that can be accommodated but not overturned, in order to realize the win–win situation effectively, the government needs to adopt a flexible urbanization strategy to combine an inclusive regional policy framework with a sustainable urban planning system in different regions of China.