Situated in the creative tourism context, the purpose of this research is to identify the place-making of urban creative clusters from originally mundane urban villages and explore the role of social capital in the transformation process. This research adopts a qualitative grounded theory approach and follows the stories and experiences of artists and lifestyle entrepreneurs in the urban villages of East lake area in Wuhan, the largest city in central China. Findings suggest that social capital of artists and lifestyle entrepreneurs contributes to the organic transformation and collective action in dealing with other stakeholders. The transformation of the urban village into an art village includes four stages: utopia for lifestyle urbanists, creative cluster for freedom-seeking artists, capital ingestion and government involvement. Keywords: urban village, place-making, social capital, creative tourism