Abstract: Analyzing the environmental impacts of urbanization is an important premise of environmental administration and pollution control. This research took Erhai Lake Basin as the research object, adopted a composite indicator assessment and selected four indicators-proportion of urban population, rural per capita net income, penetration of rural flush toilets and built-up area-to establish a comprehensive assessment system for urbanization in Erhai Lake Basin in terms of four aspects:demographic urbanization, economic urbanization, social urbanization and spatial urbanization. The system comprehensively evaluated the urbanization level in the area and analyzed the relationships between the four indicators and rural domestic sewage discharge using correlation analysis and multiple regression analysis. The results indicated that the level of urbanization in Erhai Lake Basin improved in every aspect over the period of 2006-2012, and also that Dali City is ahead of Eryuan County in terms of urbanization level. The rural domestic sewage discharge in Dali City was not significantly correlated with the proportion of urban population, with a correlation coefficient of 0.246. It was highly positively correlated to rural per capita income, rural flush toilets penetration and built-up area, with correlation coefficients of 0.951,0.980 and 0.969, respectively. In Eryuan, correlations between rural sewage discharge and all four indicators were better than those in Dali, with correlation coefficients 0.754,0.973,0.998 and 0.975, respectively. The effective weight of the four indicators in Dali ranked as:rural penetration of flush toilets > rural per capita net income > built-up area > proportion of urban population. The effective weight of the four aspects of urbanization in Eryuan ranked as:rural penetration of flush toilets > proportion of urban population > built-up area > rural per capita net income. Studies have shown that, under the existing level of urbanization, the main factor influencing rural domestic sewage discharge in Erhai Lake Basin was penetration of rural flush toilets, which means social life style urbanization is the main influencing aspect for rural sewage discharge.