The present study is an attempt to reconstruct the condition of trade and urbanisation under the Western Gangas (c. fourth to early eleventh century ce), the founders of the first indigenous state in southern Karnataka. Primarily based on the inscriptions issued by them, the study tries to trace the processes leading to the emergence of urban centre under the Western Gangas. It is argued that the Western Ganga rule did not coincide with any phase of decline in trade and commerce, as argued by the proponents of Indian Feudalism model. The state under the Western Gangas contributed to the process of urbanisation in a number of ways. The state restructured the economy of the territories under its control by promoting agrarian expansion, creating new networks of revenue collection and its redistribution. The demand for the goods and services created by the state and its agents, particularly religious establishments, necessitated their movement at intra-regional and inter-regional levels, and thus resulted in the expansion of the already existing centres of exchange as well as the creation of new ones. In other words, the process of urbanisation in the region may be attributed to the processes related to agrarian growth and the emergence of a complex indigenous power structure. The argument has been substantiated with the help of the study of urban centres, namely Perura, Kovalalapura, Manyapura, and Talavanapura.