This paper addresses the need, established following consultation with stakeholders, for more detailed environmental design guidance to support construction of more sustainable and comfortable rural dwellings in Southwest China. Despite increasing focus on sustainable design in urban developments in China, there are considerable gaps in research and information dissemination for sustainable building in more diverse rural areas. Multiple methods of investigation and analysis have been utilized. Contextual research was undertaken in relation to location, ethnic group, site/location, and building construction options. Visits to typical villages allowed discussions with stakeholders and the gathering of data on existing and new dwelling types and their surroundings. This led to the conclusion that there is insufficient attention paid in understanding residents’ knowledge and skills related to design options; further specific accessible guidance is needed. Resulting from this, quantitative analyses using climate data for 46 locations in Southwest China were used to determine the value of design opportunities to create comfortable internal environments. A need for a more detailed level of guidance that can be used by the stakeholders is presented, and 15 exemplar locations were studied in parametric fashion for typical dwelling design configurations. Outcomes indicated the value of location-specific design optimization; something now recommended for all new/redeveloped dwellings. These findings impact across a wide geographical area and could benefit daily living conditions across many rural settlements in China.