Background: In China for decades, the most desirable living arrangement for older adults has been held to be the traditional multigenerational household. However, along with the growing economy and dramatic social changes, Chinese older adults’ living arrangement could have changed as well. The present study examined and compared the patterns and correlates of actual and preferred living arrangement of Chinese community-dwelling pre-old and old, and investigated the association between their residential needs and living arrangement preferences accordingly. Methods: Nine hundred and forty-seven community-dwelling participants from three typical metropolises as Shenyang, Wuhan, and Guangzhou were enrolled and included in the final data analyses. Self-reported scales were used as measurement tools for older adults’ demographics, actual and preferred living arrangement, and residential needs. Results: We found a high proportion of coresidence in both actual 54.8% and preferred 48.5% living arrangement in Chinese pre-old and old. The main impact factors for realities were marital status and income, while for preferred living arrangement it was education level. Moreover, older adults’ living arrangement preferences had different association patterns with residential needs, in which four dimensions of perceived housing-safety, accessibility, relatedness, and leisure were more cherished by elderly living separately from children compared to those who live with children. Conclusions: The present study showed that throughout the tremendous social-economic changes happening in contemporary China, living with children was still the first choice for Chinese older adults in both actual and preferred situations. Moreover, older adults’ living arrangement preferences had different association patterns with their residential needs, in which elderly who prefer to live separately from children attached more importance to all the safety, accessibility, relatedness, and leisure aspects of housing. The present study makes substantial contributions to the understanding of the living arrangement issue in China, and such knowledge sheds light on the conceptual and practical meanings of housing, elder care and health in old age.