Urban innovation and development are a core driver for promoting the industrial, economic, and social development of cities. However, the factors that affect the innovation and development of cities lack systematic analysis as well as interaction analysis. Based on a multidimensional perspective, this study suggests that natural, economic, and social factors are three major factors conditioning urban innovation and development. A grounded theoretical qualitative method is further adopted to code relevant research literatures, news reports and interview materials, resulting in an onion factors model. We find that natural factors–including environmental quality, geographic location, and city scale–are prerequisite for conditioning urban innovation and development. Economic factors are also key, including economic level, industrial structure, industrial agglomeration, and technological innovation. Social factors are guarantee factors, including administrative hierarchy, cultural environment, population structure, and government management and services, i.e., they are essential for cities to become adaptable in the current dynamic situation. The study provides theoretical support and practical directions for the formulation of policies for urban innovation development.