The Neolithic Period began in China about 12,000 B.C. The Neolithic lasted until about 2,000 B.C. It is defined by a spread of settled agricultural communities, but hunting and gathering was still practiced. The largest concentration of agriculture was below the southern bend of the Yellow River and millet was the main crop. The geography of Neolithic China was different from today. It was much wetter, with the most of Northern China being lakes and marshes and central China covered in an enormous lake. The climate was warm and moist, rather than the colder, arid China of today. The mountains were well forested and there was a variety of animals.

Silk production, for which China is famous, had already been invented before this time period began. The process began in Northern China. It involved feeding the silkworms mulberry leaves, helping them molt and spin their cocoons, and finally, boiling the cocoons to produce the raw silk. Pottery was also present during this time period. The two main types, Painted Pottery and Black Pottery, belong to the two distinct cultural groups of the Neolithic, the Yangshao and the Longshan. These two types of pottery were not for everyday use, rather, a plain course type of pottery was used that varied between the colors gray, black, red, and white. The dwellings of this time were in clusters that suggest kinship was important. Clothing was made of hemp and the main domesticated animals were pigs and dogs. 

The Yangshao lived in the mountainous regions of northern and western China in round or rectangular houses that were below ground level and surrounded by little walls of earth. They created Painted Pottery that had geometric designs on it. The pottery was fired at 1000-1500°C, but the potters wheel was not used. Axes and arrowheads were made of polished stone and other tools were made of stone chips. Millet was the main crop of the Yangshao. They domesticated two main animals, the dog and the pig, with the pig being the more important.

The Longshan lived on the plains of eastern China. Their villages were similar to those of the Yangshao, but evidence of stamped earth fortresses is found in some sites. They created Black Pottery. This pottery was of exceptional quality. It had a polished exterior, was never painted, and is almost always without decoration. This pottery may have been a direct predecessor to later Chinese pottery, as the forms of the vessels are typical of Chinese pottery. Firing bones for the purpose of divination, which continued into the following dynasties, also began during this time. The Longshan began to bury their dead facing downwards, which is how all bodies were buried during the Bronze Age. They used bones for arrowheads and small tools, but used polished stones for axes and sickles. Their domesticated animals were the pig, dog, sheep, and ox.