Abstract: Nowadays, with the construction of the urban energy Internet, the energy suppliers and demanders have been interconnected through the power grid and the Internet. However, the existing electricity market trading mechanism based on the local marginal prices is no longer applicable to the urban energy Internet consisting of the prosumers. To this end, this paper proposes an urban energy Internet trading mechanism based on double auction, building an optimization model embedded with the distribution costs. Moreover, the above problem is efficiently solved through the multi-period network flows, which transparently shows the market equilibrating process. The reasonable allocation of the distribution costs, the effective distribution of the social welfare and the market-based pricing of the transmission capacity are guaranteed under the proposed mechanism, which incentivizes the market members to act truthfully. The proposed mechanism and its implementation based on the network flow are tested in a 15-node distribution network example, in which its economic efficiency and incentive compatibility are verified. Such an effective trading mechanism design will prompt the urban energy Internet to burst out with stronger market vitality.