The purpose of this paper is to investigate the rationale behind the transformation process of unique shophouse spatial organization in Phnom Penh. We selected 20 representative shophouses located in the Chinese district of Phnom Penh according to construction period. A qualitative study methodology was applied and field surveys were conducted that included interviews with residents, photographs, sketches, measurements, collecting historic photos, and cataloging maps. Selected cases were analyzed in terms of: basic house data, urban block analysis, and unit analysis. Cases were then classified into two types: private courtyard shophouse (PCS) and shared courtyard shophouse (SCS). PCS refers to shophouse typology that maintains most of the characteristics of early shophouses while being transformed into a modern multi-story apartment within a limited one bay plot. However, SCS refers to shophouses adapted from the indigenous forms of PCS that evolved into a multi-storey and multi-family housing typology that includes features that might have been adapted from Western apartment buildings such as sharing a big courtyard, staircase and corridors. We conclude that shophouses in Phnom Penh have positively adopted a Western building typology, adapted it to local traditions, and finally formulated a new building type that represent indicators of a modernization process gradually accepted by society.