Urban agglomeration has become the predominant form of urbanization in China. In this process, spatial interaction evidently played a significant role in promoting the collaborative development of these correlated cities. The traditional urban model’s focus on individual cities should be transformed to an urban system model. In this study, a multi-scale simulation model has been proposed to simulate the agglomeration development process of the Wuhan urban agglomeration area by embedding the multi-scale spatial interaction into the transition rule system of cellular automata (CA). A system dynamic model was used to predict the demand for new urban land at an aggregated urban agglomeration area scale. A data field approach was adopted to measuring the interaction of intercity at city scale. Neighborhood interaction was interpreted with a logistic regression method at the land parcel scale. Land use data from 1995, 2005, and 2015 were used to calibrate and evaluate the model. The simulation results show that there has been continuing urban growth in the Wuhan urban agglomeration area from 1995 to 2020. Although extension-sprawl was the predominant pattern of urban spatial expansion, the trend of extensive growth to intensive growth is clear during the entire period. The spatial interaction among these cities has been reinforced, which guided the collaborative development and formed the regional urban system network.