City creation guide

Setting

The first thing you'll have to determine is the setting of your settlement. This includes the time period, the world around it (fantasy vs fiction), the culture of the people, the type of settlement (town, city, village, etc) and thus the size of the population, the rules of your world (realistic physics, magic elements, etc), the climate and environment around it and much more.

Some will be easier to decide than others. You likely already know if you want a village or a city and the world around it is likely already determined by your story universe, but the environment may not be decided upon just yet.

There are many elements which can influence the overall appearance of your settlement. A river flowing through your town will likely mean there are many bridges, perhaps the river is large enough for a harbor of sorts. Hills will mean you get to play around with height, even more so if your settlement is set in the mountains.
A cold climate means thicker walls or some other form to make sure the houses stay warm and a rainy climate likely means your town has some form of drainage system to deal with all the water.

A lot of what you're deciding upon in this first section will generally put some restrictions on what you create later, but don't feel like you need to stick to your choices as it's never too late to change your mind and do something in a different way.

Research

Once you've mostly decided upon the setting of your settlement it's best to do some research into real life examples of similar settings. Learn about the time period, learn about what building types are used in the same climate and so on.
While doing research it could also be of great help to collect images, these can be of great assistance later when you're building your settlement or when you're describing it in your story.

Doing research may seem a little tricky if your world is completely unlike ours, but there will likely be some elements which are still similar to ours. There's also plenty of concept art available all around the internet which could help you with ideas and inspiration, if nothing else it's at least interesting to see how other people interpret similar settings and those interpretations could spark new ideas in you.

Organic growth versus planned building

It's time to get into the planning stage of your settlement, at least in terms of where specific buildings go. However, there are 2 ways you can go about planning this all out, which are organic growth and planned building. You can also mix the two of course.

Organic growth

Organic growth means you plan the placement of buildings according to how towns and cities grow over time. This will depend a lot on the time period and culture behind your settlement, but the principles are pretty much the same in all cases.
Towns start when there's a need for them or when there's an advantage to creating them. Needs include things like survival and population growth. Advantages include trade and the acquirement of important resources.

Let's take the trade example further to illustrate this point. Many towns were built alongside trade routes, usually they started out as a means to exploit or otherwise take advantage of the travelling merchants by providing them a new place to trade, a place to rest and a place of safety. This means the first things that were built in this town were taverns, a market and houses for those working in the taverns and some of the other places that might be there.
As trade continues and the town grows in wealth so will the town itself continue to grow. There may be a need for a place of worship, for horse salesmen, for cart repairmen, for security services and much more.

What you're essentially doing is picking a point alongside a route, adding a few necessary buildings and continuing from there. In this specific case the town will likely grow alongside the trade route, rather than growing outward in a circle. Easy access and reaching as many merchants as possible will be important to this town.
The same principle works for other towns. If the location is rich in important resources the town will be located near those and grow either away from it if taking those resources isn't creating more space (like mines) or toward the resources if taking those does create more space (like cutting down trees).

Planned building

Planned building is somewhat similar to organic growth in the sense that you want to begin with the most important building first. This could be a town hall, a religious building or even a school, that's all up to you. This building (or buildings) will be the center of your settlement and are seen as one of the most important features.

Once you've picked the building and it's location you continue to build outward with other buildings and places you feel are needed in that area. Perhaps a large park or a residential area for the social elite. You continue this process in a way that designs a settlement which shows off the important factors of itself and perhaps hides the lesser bits.

The purpose of planned building is to create a settlement that is better than those grown organically. Roads will be created in more efficient patterns, perhaps in stylistic patterns as well and potential decorative elements are both found more often and in more stylistic ways.
Planned building usually requires a lot of resources and most planned settlements have a specific purpose, whether it's to be the capital of a country, a major trade city or the pinnacle of architectural capabilities will be up to you and your story.

Important buildings

It's important to keep in mind that many settlements will require some form of specific services and thus buildings to accommodate those services. A religious culture will require either a central religious building or many various sized buildings to allow people to practice their religion. Many settlements will also require protection services, like a police force, a medical building in some form and a fire brigade.
Schools are important in most settlements and a library is often important to cultured settlements.

Obviously there's a huge amount of building and service types you can add to your settlements, which ones you need depends a lot on the time period and size of your settlement, but you're mostly free to add whatever you wish. Do make sure to keep it realistic though, a small town will likely not be the place for a state of the art hospital and a poor medieval village likely won't have a school.

Population

Another element which impacts which buildings you add to your settlement, and more specifically how many of those buildings you add, is the population of your settlement. Large towns need multiple schools and perhaps even a university. A single fire station is enough for a small town, but a city will need far more to reach fires in time.

A larger population also means there can be a larger variety of shops and businesses, especially niche businesses. More people means more potential customers and it's far more likely to find enough customers for something niche in an area with a large population. For example, most Western towns generally don't have a specialized store for Eastern products, but cities and larger towns often do.

Not just the businesses will be varied, a large population likely means a varied population, which means different cultures mixed together or perhaps kept separate. There are plenty of cities with a form of 'China Town' and there's usually a place of worship for many of the major religions in every city as well. Of course a varied population doesn't mean they necessarily all get along, if this is the case this is generally reflected in a separation of cultures, each belonging to their own neighborhood.
Of course all this again depends on your story universe and the needs of your story, but it's still important to think about it.

Also keep in mind that your population needs enough houses to live in and potentially needs farms and other food production sources to feed them, although this could be provided through trade as well.
Do note that having a population of 15,000 doesn't mean you need 15,000 houses, those people don't all live alone. Or perhaps they do in your universe, it's certainly possible and could make for an interesting concept.

History

History can be a major influence on the overall look of your settlement, even if your settlement was planned carefully. History could be reflected in a simple way, like having specific architectural styles or showing the age of buildings, but it is usually also part of many settlements in the form of monuments and memorials.

History can also be shown through differences in newly built structures and the old, perhaps a new style was used or different materials. But even if the same style and materials were used those newer buildings will still look newer, at least in most cases.

A final element of history is celebrations and events, many towns have their own celebrations next to public holidays and some host events like music festivals. While these aren't necessarily needed, they could provide interesting story elements and in terms of city building they could require specific buildings or places, like an open field to setup hundreds of small tents or merchant stalls.

Details

Once you've got your settlement in full development and you're certain about many of the elements and buildings you want to add it's important to think about adding the details. Details like color schemes, architectural styles and design styles. What kind of roads will your settlement have? What styles are the buildings built in? Are the buildings tall, thick, wide and/or short? Do people live in houses, apartments and/or mansions? Do you have natural elements and if so, what kind of flowers, trees and bushes are used? Is there a park or are there many of them?
Do the streets have streetlights and if so, what kind? What fences are used? What mailboxes? Is there a form of public transportation? Are there billboards or other advertisements? Do the shops have signs?

There's a whole range of details you can add and if you did some research into the setting of your settlement you'll have likely come across many elements you can use. Some details are insignificant, but others bring your settlement alive when you describe it in a story or if you decide to create it in or as a game. These details will also make sure each town feels different from the next, which is especially important if many towns are visited within your story.

Finalize it

Now that you've decided upon all the elements of your settlement, the overall structure, size and design and on the other details the only thing left to do is finalize your ideas. Try to image yourself walking down the streets, especially the streets used in your story and take in the overall feel of it. Does it feel realistic? If not, add what you feel is missing, which in many cases is likely the small details.
If you have the ability to do so it can also help a lot to sketch some of the streets in your settlement. If not, the picture you may have collected during your research can help as well. Compare them to the settlement in your imagination, does the imaginary version compare to the real (or fictional) images? If not, add what is missing.

You can still change every aspect of your town, but if you feel like you need to change a big portion of the overall structure it may be best to start over, but take the ideas you've come up with into the creation of the new and improved version. You now know what works and doesn't, so the second time will be an easier process and hopefully you end up with a better result.