In China, rapid urbanization and the decline of the canal’s shipping function have directly led to the decline of the space and style of ancient towns with canals. The ancient town of Xixing, known to be the first canal town, is located west of the Zhedong canal section of the Grand Canal. It used to be the most active transportation hub and trade transit point in the east Zhejiang Province. However, the canal is now facing problems in protection and renewal, which require urgent attention. For example, the streets of the ancient town are separated from the water system space, the self-organizing and development ability of the ancient town has weakened, and the spatial vitality is scarce. Firstly, by comparing and analyzing whether the canal is used as a road network under two different spatial scales, the area with the highest degree of spatial integration is obtained before judging whether the canal has an important influence and control on the street spaces of the ancient town. Secondly, as the canal is no longer used as a transportation network nowadays, the internal spatial structure characteristics of streets and alleys are analyzed. Finally, the topological structure analysis is carried out in the 3 km area from the border of the planning control area, and the integrated development of the ancient town space and urban transportation network is then discussed. Further, the vitality renewal strategies of the ancient town under different spatial scales are put forward to provide the empirical basis and decision-making reference for the better sustainable development of ancient towns with canals. According to research, once the ancient town is considered on a larger urban scale, the areas with the best integration and accessibility, like the water-adjoined spaces change to intersection spaces and urban road network areas. Consequently, in order to realize the sustainable development of Xixing ancient town, the city system must overcome its shortfalls in operation. The methods and conclusions in the paper can effectively contribute to the development of the ancient town. The research significantly helps to improve the average land sharing, commercial distribution, and public facilities layout in the practice of protection and development in ancient towns and provides an empirical basis and decision-making references for relevant management departments.