Abstract: With the entry of a large number of migrants into a city, local residents have to live alongside them in the same community. This paper deals with the issue of cohabitation, using Yuanhenong, a Shanghai shantytown as a case study. By analyzing the action taken by local residents against outsiders, this paper introduces the economic paradigm of “exit, voice and loyalty” into community analyses and reveals through demonstration the limitations of the Chicago School’s dual paradigm of “invasion and succession.” This paper argues that the traditional evolution model of community is not enough to explain local situations in China. As far as the action choices of local residents against outsiders are concerned, succession cannot be fully realized. It is only through the process of invasion and succession that a “mixed community” is finally formed.