A colonial city usually experiences spatial division induced by ethnic division. Busan, which held the highest proportion of the Japanese population among colonial Korean cities, was a city that represented the locality of colonized Joseon, i.e. coloniality. Yet, the city’s geographical conditions and unique history wove a double-layered sense of locality, which cannot simply be attributed to coloniality. A long stretch of hillside zone surrounding the narrow flatland along the coastline served as a natural boundary between the two ethnic groups, forming a landscape unique to Busan. In addition, by hosting the Japanese diplomatic and trading headquarters, the city had a history of interaction with Japan going back several hundred years, which facilitated the settlement of the Japanese in Busan more rapidly than any other city in Korea. This article approaches the topic of hill villages, regarded still as a symbolic landscape and space of Busan, from a historical perspective, with a focus on spatial production and arrangement, and attempts to account for the socioeconomic relations of the colonial city.