When Kublai Khan, the grandson of Genghis Khan visited Yanjing in 1261, much of old Zhongdu, including the imperial palace, lay in ruin. He stayed in the Taining Palace located on Qionghua Island in the Gaoliang River northeast of Zhongdu. The palace was built by the Jin in 1179 as a country retreat, much like the later Summer Palace of the Qing.[38] Unlike other Mongol leaders who wanted to retain the traditional tribal confederation based in Karakorum, Kublai Khan was eager to become the emperor of a cosmopolitan empire. He spent the next four years waging and winning a civil war against rival Mongol chieftains, and in 1264 ordered advisor Liu Bingzhong to build his new capital at Yanjing. In 1260, he had already begun construction of his capital at Xanadu, some 275 km due north of Beijing on the Luan River in present-day Inner Mongolia, but he preferred the location of Beijing. With the North China Plain opening to the south and the steppes just beyond the mountain passes to the north, Beijing was an ideal midway point for Kublai Khan's new seat of power. In 1271, he declared the creation of the Yuan Dynasty and named his capital Dadu (大都, Chinese for "Grand Capital",[39] or Daidu to the Mongols). It is also known by the Mongol name Khanbaliq (汗八里), spelled Cambuluc in Marco Polo's accounts. After the construction of Dadu, Xanadu, also known as Shangdu, became Kublai Khan's summer capital.

Rather than continuing on the foundation of Zhongdu, the new capital Dadu was shifted to the northeast and built around the old Taining Palace on Qionghua Island in the middle of the Gaoliang River. This move set in place Beijing's current north-south central axis. Dadu was nearly twice the size of Zhongdu. It stretched from present-day Chang'an Avenue in the south to the earthen Dadu city walls that still stand in northern and northeastern Beijing, between the 3rd and 4th Ring Roads. The city had earthen walls 24 m thick and 11 city gates, two in the north and three each in the other cardinal directions. Later, the Ming Dynasty lined portions of Dadu's eastern and western walls with brick and reused four of their gates. Thus, Dadu had the same width as the Beijing of the Ming and Qing dynasties. The geographic center of the Dadu was marked with a pavilion, which is now the Drum Tower.