With the massive urbanization and industrialization in China, the paradox between fast modernization and cultural preservation arouses challenges on new insight into green construction and sustainable development strategies throughout the nation. Particularly, how to strike a balanced cultural–modern rural revitalization has become a research priority, especially for cultural and historical villages in relatively under developed western regions. In this paper, taking Gaotunzi Village, a traditional ethnic village in western high-altitude plateau as an illustrative example, the typical green design manner and optimization strategy are proposed for cultural and architectural heritage preservation. The detailed architecture and structure design is conducted for both old temple retrofitting and new museum construction, with consideration for retaining traditional building colors, styles, and materials. Moreover, land use planning is demonstrated for local public space and services upgrading. The overall design strategy has been taken into practice for the local renovation construction program. The preliminary results indicate that this green retrofitting idea and approach are quite locally feasible for sustainable rural revitalization with local heritage conservation, including traditional wooden buildings, Buddhism belief, Tibetan icons, and ethnic symbolic culture preservation and promotion. This work can provide a typical design reference and application prototype for rural construction and modernization with local heritage preservation considerations, especially for those traditional villages in developing countries.