The drifting elderly are an interprovincial floating elderly population that is mainly composed of unemployed older parents in China. They have left their usual residence and relocated to urban areas, facing challenge about social integration. As a neighborhood has played important roles in the floating population’s social integration, this study was designed to investigate the influence of neighborhood-based identity and social participation on the social integration of the drifting elderly. Five rounds of data collection and analysis were conducted in a continuous crossover sequence using grounded theory. Twenty-four participants were recruited from three districts in Shanghai, China. The neighborhood was shown to play a prominent role in the drifting elderly’s perceptions of social integration. Good neighborhood relations help the drifting elderly establish effective social support networks, interact with inflowing society, get in touch with more human resources, and form social relationships and networks. Neighborhood-based participants and identity were more conducive to eliminating heterogeneity and creating homogeneity for the drifting elderly. Thus, the neighborhood affects the social integration of the drifting elderly, which directly impacts their social feelings, integrations, and networks. Management of social integration among the drifting elderly should be focused on creating general opportunities for them to participate in neighborhood-based social events with a reasonable identity.