The external scale economy and congestion effects have been ignored in the city model of New Economic Geography for a long time, so that the crucial feature named externality is absent in the analysis of city size and urban spatial structure. This paper builds up a city development model based on internal scale economy, external scale economy and congestion effects, and analyzes the effects brought by externalities on optimal city size and urban spatial structure. Under the framework of New Economic Geography, our model shows that the externalities have important influence on city development. The numerical simulation shows that there is an inverted-U-shaped relationship between welfare level and city size, and the optimal city size will keep increasing if we enhance the external scale economy or reduce the congestion effects. With a growing population, rent rate and aggregate land rent grow more rapidly, and the monocentric spatial structure is no longer stable, but which style will come into existence is decided by the dimensions of external scale economy and congestion effects.