For sustainable economic development and urbanization in plateau lake basins, city planning needs to balance the tradeoff between urban growth and preservation of ecological environment by adopting intensive land use and maintaining sufficient open space. This research designs and evaluates four land use types in Dianchi Lake basin, Yunnan Province, China: development without constraints, ecologically constrained development, intensive land use development, and ecologically-constrained intensive land use development. The SLEUTH model is used to examine the four scenarios, and suggests that the ecologically constrained intensive land use development patterns outperform others. The scenario strikes a nice balance between the development across the whole urbanicity spectrum (i.e., City-Town-Village or CTV) and protecting the ecological environment in the Dianchi Lake basin. Related policy recommendations are also proposed.