Purpose—The digital entrepreneurship ecosystem (DEE) literature is dominated by conceptual studies and lacks micro-level theoretical foundations and empirical evidence. This study aims to explore the largely overlooked question of what the components and operational mechanisms of DEE are. Design/methodology/approach—The study adopts a qualitative exploratory approach. The empirical data consist of field research, semi-structured interviews, and web-based information. Hangzhou Dream Town, China, is the research object. Findings—This study reveals the composition and operation mechanism of DEE. The operation mechanisms of DEE include opportunity symbiosis and value symbiosis. Compositions include digital users, digital entrepreneurs, investment institutions, governments, etc. Practical implications—This study contributes to DEE research by analyzing China’s DEE to help other regions understand how government-driven DEEs are established. This study also helps Digital Startups understand how the DEE works, which allows them to achieve digital entrepreneurship. Originality/value—The study draws evidence from a micro-level perspective which enriches understanding of the DEE phenomenon. It also provides theoretical support for the establishment of a DEE.