A pilot program concerning source separation of household waste was launched in Hangzhou, capital city of Zhejiang province, China. Detailed investigations on the composition and properties of household waste in the experimental communities revealed that high water content and high percentage of food waste are the main limiting factors in the recovery of recyclables, especially paper from household waste, and the main contributors to the high cost and low efficiency of waste disposal. On the basis of the investigation, a novel source separation method, according to which household waste was classified as food waste, dry waste and harmful waste, was proposed and performed in four selected communities. In addition, a corresponding household waste management system that involves all stakeholders, a recovery system and a mechanical dehydration system for food waste were constituted to promote source separation activity. Performances and the questionnaire survey results showed that the active support and investment of a real estate company and a community residential committee play important roles in enhancing public participation and awareness of the importance of waste source separation. In comparison with the conventional mixed collection and transportation system of household waste, the established source separation and management system is cost-effective. It could be extended to the entire city and used by other cities in China as a source of reference.