During the Qing Dynasty, as the Naxi (also spelt Nakhi and Nahi) people increased cultural exchange with the Han, Bai and Tibetan people, they absorbed foreign architectural techniques and incorporated them into the design of their own residential buildings, creating a unique ethnic home style known as "one courtyard with five skylights" or "three rooms with one screen wall." Elaborate in design and delicate in decoration, these houses have been hailed as "architectural museums" by architects at home and abroad.

"Three rooms with one screen wall" is the basic house style in Lijiang. The principal room and the left and right wing rooms combine to form a three-sided courtyard, with a screen wall standing opposite the principal room. Each two-story room is divided with three partitions. The principal room often faces south, is higher than the others, and is reserved for the senior family members. The east and west wing rooms are for the younger residents.

In the "one courtyard with five skylights" design, the principal room, the servants' room and the left and right wing-rooms form a close courtyard, with a main skylight in the center and four smaller skylights at the four corners.

The large skylight, a feature in each residence, helps to create a clean, serene, spacious and comfortable courtyard. Often paved with pebbles, tile fragments or small rocks arranged in various propitious designs, the courtyard is usually decorated with verdant grass and flowers and surrounded by colorful flowerbeds, miniature trees, and liana twining around pillars. Another common characteristic of both urban and rural Naxi residential houses is the use of a "Xiazi" (external corridor) in front of the principal room. Paved with square, hexagonal and octagonal tiles, the corridor is full of sunlight and a good spot for family members enjoy dinner, receive guests and relax.

Opposite the principal room is a screen wall, on which bamboo, orchids, or a huge character for "fu" (happiness) is normally painted with thin ink.

The residential houses in the old city fully express a harmonious mixture of primitive simplicity and sophisticated elegance. The exterior wall is solid without complex and elaborate decoration, and the windshield, eaves, and mounted fish-shaped board are all simple, crude and ancient in style. By contrast, the decorations on the windows, doors and beams are elaborately fashioned.

The casements, doors and eaves are always engraved with exquisite figures that prove the adage: "beauty hidden in rudeness and simplicity contains fineness".