Recent advancements in generative models have enabled 3D urban scene generation from satellite imagery, unlocking promising applications in gaming, digital twins, and beyond. However, most existing methods rely heavily on neural rendering techniques, which hinder their ability to produce detailed 3D structures on a broader scale, largely due to the inherent structural ambiguity derived from relatively limited 2D observations. To address this challenge, we propose Sat2City, a novel framework that synergizes the representational capacity of sparse voxel grids with latent diffusion models, tailored specifically for our novel 3D city dataset. Our approach is enabled by three key components: (1) A cascaded latent diffusion framework that progressively recovers 3D city structures from satellite imagery, (2) a Re-Hash operation at its Variational Autoencoder (VAE) bottleneck to compute multi-scale feature grids for stable appearance optimization and (3) an inverse sampling strategy enabling implicit supervision for smooth appearance transitioning.To overcome the challenge of collecting real-world city-scale 3D models with high-quality geometry and appearance, we introduce a dataset of synthesized large-scale 3D cities paired with satellite-view height maps. Validated on this dataset, our framework generates detailed 3D structures from a single satellite image, achieving superior fidelity compared to existing city generation models.