Energy intensity reduction has become a constrained target from the 11th five-year plan in China. Energy consumption is expected to increase because of rapid urbanization and economic growth, whereas energy intensity reduction is regarded as a method to alleviate the pressure of growing energy demand. An important contribution of this study is the investigation of urbanization impact on energy intensity across China at the urban level. This research uses a balanced panel data set of 224 cities for the period between 2005 and 2016 and reports deep insights into and innovative findings for the reduction of energy intensity across different regions and cities in China. To examine the direct, indirect, and total effects and regional heterogeneous effects, we employ spatial Durbin models and spatial decomposition techniques. It reveals significant and negative direct effects of urbanization in the western and full regions. However, the indirect and total effects of urbanization are significantly negative in the eastern and western regions. The pressure of urbanization on energy has alleviated and is reversing, especially under the construction of people-oriented and green new-type urbanization. The empirics highlight industrialization as a contributing factor for high energy intensity in the spatial outcomes of regional analysis. The direct effect of per capita GDP supports the existence of the inverted U-shaped relationship between economic development and energy intensity. The study proposes fruitful implications to construct new-type urbanization for energy conservation and sustainable development in China.