The rural creative class contributes to the cultural life and local economic growth in small towns. Although creative based development mitigates various negative externalities of tourism development, small towns have started to suffer from the vicious circle of creative tourism which often entails the displacement of the rural creative class and locals. In this article, we examine the rise and fall of the rural creative class to better understand the vicious circle perspective of creative-based development in small towns. The study focuses on the growth and transformation process of the creative district in Alaçatı, which is a small town in İzmir (Turkey). The study applies mixed method approaches including longitudinal observations and in-depth interviews in three stages: in 2013, 2016 and 2019. The results reveal that creative tourism can be used as a potential development tool in small town settings. However, the lack of comprehensive creative-based tourism development strategies can result in the fall of the rural creative class.