During the past decades, many traditional vernacular buildings have been forced to be demolished or abandoned due to the accelerating trend of urbanisation in China, which has resulted in regional culture, historical memory, and architectural narratives being gradually lost. The contemporary development of courtyard-style architecture under the influence of Confucianism, an important architectural form that carries Chinese culture, remains unclear. To preserve these vernacular buildings and local culture, this paper traces the historical value of courtyard houses. Through a case study, the effectiveness of local courtyard-style building rehabilitation in Shandong is assessed, and key components, building materials, and construction techniques corresponding to Confucian cultural connotations are examined, leading to a more comprehensive dialectical analysis of building rehabilitation. The results indicated that rehabilitation can be effective in preserving vernacular components and cultural narratives in the context of sustainable development strategies for traditional buildings. Moreover, by identifying and evaluating the sense of place and rehabilitation strategies of the architectural heritage, new perspectives are offered to the world of vernacular architectural practice, and existing knowledge of the architectural courtyard is expanded.