The fundamental disputes in urban heritage regeneration stem from variations in power dynamics and inherent value systems among stakeholders. Addressing conflicts and power differentials involving governmental bodies, market forces, community residents, experts, and scholars is crucial for fostering sustainable urban heritage development. Recently, these contradictions have grown more pronounced as China’s urbanization has transitioned from rapid expansion to a phase focused on existing urban assets. In the present research, the typical traditional courtyard-style residential buildings in Jinan, a historic city in northern China, were selected as the object of study. These houses often suffer from problems such as outdated infrastructure and low living conditions and have become difficult to adapt to contemporary urban life. A case study approach was employed focusing on a representative courtyard house to develop models for renewing and regenerating urban heritage, specifically tailored to traditional courtyard houses. The aim was to address conflicts and power disparities among urban heritage stakeholders through diverse mechanisms. Methodologically, the research integrates historical study and field investigation, participatory analysis, and policy analysis. Primary data sources include field surveys, historical research, oral interviews, and drone aerial photography. Models were constructed in the present study—namely, the heritage self-renewal, heritage revitalization, and heritage transformation models—for traditional courtyard houses. These models were designed to foster sustainable urban heritage development through collaborative efforts across various stakeholders and administrative levels. They will optimize the renewal mechanism of urban heritage, thus providing diversity and multiple possibilities for the preservation and reuse of architectural heritage in China. They aim to realize comprehensive urban heritage values, including vitality, health, efficiency, and equity, while accommodating the interests of diverse stakeholders.