Abstract: At present, too much attention has been paid to villages in the study of village human settlement environment. To address the situation, this study, based on the GIS technical method and field investigation, selects the Yuanjiang River basin where the terraced settlements are located, and the Dawazhe River sub-basin as a typical sample, to explore the spatial macro and micro characteristics of human settlements in the drainage basin. It reaches the conclusions as follows: 1) The rugged mountains and dense water systems in Ailao Mountain area have created the pattern of the Yuanjiang River basin. It has laid the foundation for human settlements of terraced areas in the sub-basin scales with the horizontal and vertical dimensions. 2) The living environment of the Dawazhe River sub-basin takes the general characteristics of “typical mountain background, connected with broom-shaped water system”. It has formed the Yi settlement area in the middle and low mountainous areas, with “faceted forests as the core, villages scattered around, and mixture of dryland and terraces”. And it has formed the Hani settlement area in the middle mountain area, with “faceted terraces as the core, villages scattered around, and enclosure of belt forests”. The difference between the two stems from the differentiated farming strategies in which different ethnic groups adapt to the vertical differentiation effect. 3) Watershed is the basic unit of human settlements research. The watershed vision beyond the villages themselves is of great value and universal significance to the study of human settlements in complex geographical environment.