This paper sets up the theoretical analysis frame of local government’s financial governance ability influencing local urbanization, using dynamic panel data model and system GMM estimation method, to make empirical test of local financial governance capacity and situ urbanization. The empirical results show that, the local financial governance capacity has a significant positive impact on situ urbanization, but the positive effect of financial governance capacity in the central and western regions is greater than that in the eastern region. The influence of rural human capital on situ urbanization has a typical “U-shaped” curve, the average “threshold value” of rural human capital across the country is 8.63 years, and the average “threshold value” of rural human capital in the eastern and central and western regions are 8.13 years and 9.17 years, crossing the threshold of human capital is extremely important for Situ urbanization. The policy suggestion of this paper is that, in the process of situ urbanization, not only should be pay attention to the improvement of local fiscal governance capacity, but also pay more attention to the investment of rural human capital, since “comprehensive intelligence support” is more effective than “simple transfusion”.