Since the twenty-first century, small towns have become a key region of rapid urbanization in East Africa. In this study, the cities of two typical East African countries-Tanzania and Uganda-were classified and towns and small cities with less than 100000 people were identified as the research regions. Seven natural environment variables and six socioeconomic variables were selected and combined with urban data to construct a maximum entropy model. The average habitat suitability index (HSI) obtained from the model was used to discern the suitability of small town formation, classify the potential areas for development, and compare and analyze them with population density. It was found that: 1) Distance from regional major traffic arteries, distance from national major traffic arteries, normalized difference vegetation index (NDVI), and distance from large cities all have high contribution rates to town and small city development in the two countries; each country has its own high contribution variables specific to cities of different sizes. 2) As the size of cities increases, the contribution rate of traffic arteries decreases and the contribution rate of natural environment variables increases.3) The HSI values in northern Tanzania are higher than those in the south overall. The towns in the high HSI area are clustered, and distribution of the small cities is in stripes. In Uganda, the HSI values are lower in the whole country, and the towns in the high HSI area are in a radial network distribution starting from Kampala, while the distribution of small cities is in a fragmented shape. The HSI high value areas in both countries are basically located near road networks and rivers and lakes. 4) Population density of Tanzania is generally lower than that of Uganda, while the total area of its potential development areas is larger than that of Uganda. The relationship between potential development areas and population density is divided into three main types: (1) larger than the surrounding area's population density, for areas with a long history, strong economic power, and close to large and medium-sized cities; (2) similar to the surrounding area's population density, for areas under rapid development; and (3) smaller than the surrounding area's population density, for areas with superior location conditions. These results fill the research gap of small towns in East Africa where information is scarce, and provide references for future urban construction in East African countries and investment cooperation between China and East Africa.