A area covering 245,000 square meters inside the moat, equal to about the size of 46 American football fields, has not been unearthed.

"We haven't excavated the settlement inside the moat but its scale was seldom seen at this age," Wang said.

"As far as I know, the area inside the moat could be the largest and best preserved among settlements of this age," said Prof. Yan Wenming, a history expert with the School of Archaeology and Museology at Peking University.

There were several other settlements of the same age nearby the discovery, but they were much smaller.

"This one was very much likely to be an ancient town," said Wang.

Archaeologists divide the Yangshao culture into three stages: between 5,000 to 4,000 BC, the middle period from 4,000 to 3,500 BC, and the one from 3,500 to 3,000 BC.

"We know little about how people lived and were related in the middle stage. The discovery of this settlement offers a very rare and valuable chance to study this stage," said Chen Xingcan, deputy director of the Institute of Archaeology under the Chinese Academy of Social Sciences (CASS).

Early Yangshao settlements have mainly been found in Shaanxi, but during the middle stage people spread to nearly half of what's considered today's China. Discoveries have been made in the north near the Great Wall, south to the Yangtze River, east to Shandong Province and west to Gansu and Qinghai provinces, Wang said.