The conservation and reusing model of the Tianzifang is the bottom–up conservation and reusing practices participated by ordinary citizens, shop owners and enterprises. However, the new interest allocation mechanism has been causing tensions and predicaments. The research carries out an empirical investigation on the situation of the commercial and residential mixture during the conservation and reusing practices of the Tianzifang. Meanwhile, the analysis and interpretation are carried out on its dilemma and conflict in the perspective of property right proposed by new institutional economists—Barzel Y. and Coase R. H. Furthermore, the conclusion can be drawn that the prime reason that causes the conflict of commercial and residential mixture lies in the fact that the property right of its living space has been re-delineated during the process of the conservation and reusing practice of the Tianzifang. Therefore, an in-depth understanding of the property rights of the Tianzifang historical district will offer new opportunities to solve the conflict on spatial interests.