The system design of grassroots self-governance in urban communities is an important practice of grassroots democratic governance in China. The research on the urban community governance is of great significance to the research on the modernization of national governance system and governance capabilities. The governance of urban community is a typical example of multiple coordinated governance. The level and ability of cooperative governance between different governance entities will determine the overall performance of community governance. The article conducts an in-depth deconstruction of the governance dysfunction in a community in the City of XZ. The article proposes a theoretical model of community governance performance loss. Based on the theoretical perspective of performance loss, the article analyzes the behavior of different governance entities in the community governance process and results. It also analyzes the internal relationship between the behavior of community governance entities and performance loss, and discusses the internal incentives for the decline and weakening of the grassroots governance function of urban communities. With the help of the production and selection process of community governance performance loss, it helps people to fully understand the problems in the implementation of autonomous governance mechanisms in China's new communities from the perspective of performance loss. Based on the analysis of the generation mechanism of community governance performance loss, the author has put forward countermeasures and suggestions to effectively avoid the loss of grassroots community governance performance so as to provide a new approach to improving the urban community governance system and governance capabilities.