Don't draw another line on the map! Do you have a city plan mapped out? Not the layout of the landscape – although that's important too – but the concept of the city itself? Take strategy into consideration first. I'll show you how to handle town creation with size, economics (macro and micro), population density, organizations and points of interest.
At the start you're going to concern yourself with the size of the project. How big a city are we talking here? Consider the total size in terms of population. The reason we're deciding this early on is because a city for one-hundred people will be different than one for ten-thousand, and even more different than a city made with one-million people in mind. More things than just the number of houses will come into play from this number. Businesses and included industries can change a lot too. It's easy to see a smaller city lacking a thieves guild or a black market in most instances but it's much more difficult to imagine for the typical metropolis.
Where does your city fit into the grand scope of the world? If I'm focusing on politics and it's important to know how the cities interact then I'm more interested in what niche this city fills in the global marketplace. Maybe they are a farming community supplying livestock and feed for the more industrialized cities. Perhaps they are the most industrialized city in the world. Those campaigns where I'm more interested in location could have this city as humanities last stronghold against the evil raining in from the High Peaks. Just like with characters, you should decide what this city accomplishes for you and your players beyond the basic “contains people.”
This is the good stuff! Now that you have a rough idea of how many people are in your city and what role it fills in the world, it's time to decide how it does it. Farming communities are a nice example to start with. If the climate in that area is favorable then maybe they don't need irrigation, otherwise they'll have presumably solved that problem already. Does this town specialize in training foot-soldiers for the Coalition? There's probably going to be some transportation involved specifically for that purpose. A key thing here is to think of what your city does and then iron out many separate ways for how it does it. People are incredibly resourceful and this step should reflect that.
Densely packed places aren't kind to most farming ventures. People who are dispersed far and wide don't usually benefit much from the city walls the typical military-minded city would have. Following those three steps is the decision for how tightly knit the community is. This should be a fairly linear decision given the size and more especially the microeconomics of your city. If you'd like then you can also take this time to determine what mix of races your city is going to have. Fantasy gamers can easily import a variety of creatures ranging from gnomes to vampires. Both fantasy gamers and realistic gamers also benefit from considering other races of the same species. How about humans who have immigrated from another region of your world and retained their culture and customs?
We're getting somewhere now. Next comes the organizations that make up the backbone of your city environment. What kind of government is there? Has there been conflict and are several bodies vying for control of the populace? Don't forget the firms that head up the important industries. Have you got a city devoted to mining? Surely there's at least one company devoted to that. Is this a trading post between several larger locations? A merchant union has probably formed by now. Find a niche and fill it with the organization of your choice. In the event that one firm fills many niches that's fine, it just means they'll end up being larger and more powerful than otherwise!
Once the practical work on your town is done then it's time to bring it to life. Is there a reason the city was made in this precise location? The miner's guild might be keenly interested not only in the current quarries as a source of income, but also the very first quarry as a historical landmark. Peaceful meadows nearby would inevitably attract nature-lovers and perhaps be given a name all their own. Have the catacombs beneath the church been sealed off in the past due to hauntings? Finalizing your city concept includes questions such as these. Breath vitality into the city so that your players will be talking about it for years to come. Variety is the spice of life.
With a solid plan before you put all of the buildings and roads on the map you'll have a much stronger idea of not only how these individual parts are going to work together but also how each one will be contributing to your campaign in it's entirety. Taking this extra time to plan your route can save you from both pointless creation (from a DM standpoint) and continually required editing. Even with your amazing strategic city concept, make sure to do rough drafts in pencil. You never know when creativity will strike again. Happy creating!