Chinese Civilization is known as a civilization of li 禮 (rites), which is one of the main features that distinguishes it from other civilizations in the ancient world. While many scholars in this century have studied li, their indiscriminate use of western anthropological models has caused them to equate li to the customs and rites of primitive peoples. The present paper, after reviewing past resarch on the origins of li, explores the qualities and functions of li in ancient China. The author concludes that li is a social system and cultural structure unique to Chinese civilization, combining political, education, ethical and legal systems into a whole, and that the main function of li in ancient times was to organize society in terms of rank, class and duty. According to the Chinese classics, li consists of two main components--the first is li zhi 禮制 (li institutions), which include political, legal and social rules; the second is li dian 禮典 (li ceremonies ), which covers the various rites such as worship, tributes, weddings and funerals. Through study of prehistoric Chinese cultures, especially the Liang Zhu 良渚 Culture of over 5,000 years ago, we find that li existed at that time and was already in the process of becoming institutionalized.