Decide what the settlement’s water supplies are (lake, river, wells?) and draw this on a map, whether with pencil and paper or a program like City Designer 3 from Pro Fantasy. Then choose an area as “old town,” which is where the settlement began before spreading out. There’s probably an original set of buildings, possibly surrounded by a small, dilapidated wall. Here lie crowded streets and possibly thieves and the poor. An original mayor’s hall could be here. Sometimes these old towns are preserved but other times they might be demolished due to the space being needed for something better. There’s likely to be some industry near the river, too, including anything that produces waste.
Upriver from here, if applicable, create the wealthy area, which can be one of several. We might have another location that qualifies, too, such as higher land or a castle or other fortification. There’s likely to be a port, and related commercial industry near the river but not fully occupying the territory. We don’t need to be specific about the latter, just that factories and the like are there.
Remember that while a small village might be on level ground, larger places seldom are due to expansion and variable surfaces. Higher areas are often used for the wealthy, fortifications, or important buildings like a shrine or mayor’s residence. Lower areas might flood, especially along the river, lake, or ocean. If this happens or the tide causes extreme fluctuations in water level, consider how this might affect structures along the shore (such as being built on stilts).
If you have multiple species living here, decide if they have their own sections of town and where those areas are. A water dwelling species is by the water source, most likely, unless they’re salt water creatures, and their ability to come upon land will impact their influence. Elves might be near a forested area, but if there isn’t one, then is there a town gate with a road that leads toward the nearest forest, and which provides a better view of it? The same holds true of other species like dwarves wanting a view of hills or mountains, but there’s no reason they can’t live all the way across town, too. The question is where is a concentrated group of them dwelling?
Now that we’ve chosen a few locations for “old town,” the wealthy, species quarters, and important buildings, we can begin filling in housing, commercial, and industrial locations. We can include spaces for parks, a stadium, cemeteries, and public gatherings. An array of other specifics could be included, such as the prison, but these are only worth noting if we intend to use them.
Before depicting any of them, decide which kind of neighborhood each is. The reason is that if we want a crime-ridden, poor area, we probably want more industry there, too, and fewer parks; parks may exist, but they will be poorly maintained (a detail we can ignore). What we’re after is the knowledge of what reputation each section of town has. We then want to create our neighborhoods with that in mind. Think about where you live; somewhere is considered nice while another is run down, while a third might be downright dangerous. Naming neighborhoods can be as simple as compass points: southeast is unsafe while northwest is wealthy. I’d probably say that northwest is therefore up on a big hill, has more parks, and a great shrine to a cherished god. Southeast might be near the river, industry, and a place of frequent muggings, unrest, and dissent, with close, crowded streets and smaller, old homes.
We’ll need to leave space for roads. Consider leaving a wide avenue in wealthier areas or from the castle to a major gate. We should also determine where a garrison is, if it exists, and what the likeliest point of attack is, as that’s where the castle goes (on a hill). We should also form an idea of where the main city wall is; does it surround the entire community or has further development taken place since its construction so that some buildings are now outside the wall?
This should be enough to get world builders started on map creation. Once you’re working, you’ll have ideas on how to proceed.