As the development of Traditional Chinese Medicine (TCM) health care services expands in urban areas, the health care needs of urban residents have become increasingly prominent. To ensure targeted and well-planned development of TCM health care service institutions and to establish a development model that caters to the needs of urban residents, this study conducted a questionnaire survey and interview research on the health care demands of urban residents and the distribution of TCM health care service institutions in W City. The results revealed misconceptions in the urban residents’ understanding of TCM cultural knowledge, a lack of rationality in the layout of urban TCM health care service institutions, a lack of regulatory mechanisms in grassroots TCM health care institutions, and a requirement to raise industry entry barriers. In response to these findings, this study proposed corresponding countermeasures and suggestions in terms of demand, promotion, and management.