Urban neighbourhood has become a conspicuous arena of policy intervention in China, since the central government intensively promoted a Shequ system to strengthen its infrastructure power at neighbourhood level in the 1990s. As recent researches give increasing discussions to the roles different actors play and the division of responsibility within institutional procedures of Shequ, few empirical studies have been carried out to explore the everyday governing process and the stories happening at the receiving end of governance. This research uses a Foucauldian governmentality framework to critically analyse the Shequ institutions’ governing technologies in their everyday practices, and how these technologies succeed or fail to shape citizens’ conduct. Empirical evidences from the case study portray a hybridising scenario, in which the Shequ institutions embrace both the Maoist and Confucian discourses to cultivate active and responsible citizens. Nevertheless, residents’ divergent reactions to the government mobilisation suggest a process in which citizens develop their own ways to internalise or refuse the government interventions which aim to regulate their conduct. This paper concludes by suggesting that giving its materials of stories about the implementers and receivers of government discourses, neighbourhood governance can make important contributions to governmentality research in regards to the topics around the state’s power exercise at the grassroots society and citizens’ struggle around subjectivity.