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The state is playing an increasingly important role in the recent wave of gentrification. This study reveals that strong state intervention in Shanghai's gentrification can be seen in three aspects. First, the state stimulates and accommodates the consumption demands of gentrifiers. Second, to create optimal conditions for capital circulation, the state makes policy interventions and invests heavily in environment beautification and infrastructure construction. Third, the state mobilizes the most important resources to tackle the problem of fragmented property rights and to facilitate gentrification. The state-sponsored gentrification under market transition is motivated by the pursuit of economic and urban growth at the cost of large-scale residential displacement.