In the paper, the connotations of welfare are briefly outlined from the broad and narrow aspects and the changes of villagers’ welfare of urban villages in city are analyzed. In economic welfare terms, at the same time of losing their lands, villagers have obtain certain amount of land compensation after the expropriation of lands. In non-economic welfare terms, the social status, lifestyle, environmental conditions and psychological state of the reallocated villagers have changed obviously. The status quo of the urban villages is outlined. Besides, the main problems in the urban villages of Guangzhou are probed into, which covering the ubiquitous illegal utilization of lands and illegal construction, poor public order, low public quality, imperfect public facilities and so on. The modes (Liede mode, Pazhou mode, Huadi mode and public self-financing mode) and characteristics of reconstructing the urban villages are concluded. The impact of the construction on villagers’ welfare is concluded as well as the security system for protecting villagers’ welfare in the reconstruction of urban villages. It is suggested that the government and the villages should share the expenditures on the education and training of villages and share the input on infrastructure. In addition, the government and the villages should take the responsibilities in terms of public security, culture and so on.