Since China entered the 21st century, a phenomenon of return migrants moving back from urban to rural areas has been noted, especially in central regions such as Hubei Province. Despite its significance, this phenomenon remains inadequately understood. Employing ethnographic research methods, we conducted multiple rounds of fieldwork in Guangzhou, Wuhan, and three of Wuhan’s neighbouring county-level cities—Hanchuan, Xiantao, and Tianmen—where rising garment industrial enclaves and return migration have been observed. Our findings reveal that the pro-growth policies of megacities like Wuhan and Guangzhou, aimed at industrial transformation while eliminating ‘low-end’ manufacturing, have forced migrants to leave large cities. Among these individuals, return-migrant entrepreneurs (RMEs), comprising entrepreneurs and family workshop owners, have had a profound impact on advancing county urbanisation in Hubei Province. Specifically, we identified three features for return-migrant urbanisation. First, entrepreneurs took their return as an opportunity to expand and promote their businesses, thereby fostering industrialisation in Hanchuan. Second, local state activities in Xiantao, encompassing the construction of highways, logistics systems, and other facilities, coupled with institutionalised arrangements, triggered return migration and township urbanisation. Third, households and individuals with entrepreneurship dominated the development of the informal workshop industry in Tianmen. Overall, our study contributes to the nuanced understanding of new types of urbanisation in China.