In 1953 when workers were laying the foundations for a factory at Banpo, less than seven kilometres (four miles) east of Xi'an, they came upon the remains of an ancient settlement. The discovery of this New Stone Age village has been described as the 'greatest single contribution to prehistoric archaeology in East Asia' (John Hay, Ancient China, Bodley Head, 1973). Between 1954 and 1957, archaeologists working at the site obtained the first detailed data on the layout of a Neolithhic village. Dating from approximately 5000 to 4000 BCE, it is the most complete example of an agricultural Neolithic settlement anywhere in the world. Its remarkably well-preserved condition makes it a major attraction for visitors to Xi'an.

An area of 4,000 square metres (one acre) has been fully excavated, enclosed and put on view to the public. Foundations of 45 houses have been uncovered, some round, some square. The largest dwelling may have been a communal meeting place, or alternatively the house of the chief. Among the other impressive finds are: 200 storage pots, a collection of pottery and tools, a potterymaking centre and a graveyard with more than 250 graves. The museum is simply but sensibly laid out. The main hall, in the rear, was built over the excavation site. Two smaller exhibition halls by the entrance display unearthed items, drawings and explanatory notes in both Chinese and English.

From the implements and utensils discovered, archaeologists have learned a great deal about the daily life of Banpo. It was a typical Yangshao Culture community.

Two to three hundred people lived there, practising slash-and-burn agriculture. They depended on millet and pork for their existence. In addition to millet, they planted vegetables such as cabbage and mustard, and hemp which was used to make clothing. They kept pigs, dogs and perhaps chickens and other animals. They also hunted and fished. They fired and painted extraordinarily beautiful clay pots with both abstract and non-abstract designs. The earlier decorations on these vessels portrayed fish with mouths open, fishing-nets and deer on the run-subjects reflecting the main preoccupations of Banpo's inhabitants. Gradually, as the displayed pots show quite clearly, the designs became abstract: the fish motif, for instance, was later replaced by a geometric pattern.

Chinese archaeologists believe that a primitive communist matriarchal clan lived at Banpo.

In the communal burial ground found to the north of the site, men and women were buried separately, usually by themselves, but sometimes in multiple single-sex graves. Examples of these graves are on display. Women were generally interred with a greater number of funeral objects than men. However, it has been pointed out by foreign archaeologists that in most early matriarchal settlements excavated elsewhere, whole families related through the female line have been found buried together. At Banpo, as in other Yangshao cultures, children buried in jars have been found near some houses, although the cemetery was placed outside the village.

The Banpo Museum is located at the eastern end of the city, a convenient stop on the way to or from the Terracotta Warriors.