The paper fills a gap in the discussion of The Religion of China by focusing on Weber’s treatment of Daoism. First, it presents an examination of Weber’s use of sources in his construction of Daoism and his location of mysticism and religion in the early Daoist text Daodejing. Second, his treatment of Daoism – and Confucianism – within the orthodox/heterodox framework is examined and shown to be a European projection inadequate for understanding Chinese state practices. Finally, it is shown that Weber’s approach prevents appreciation of the contribution of Daoist thought to a Chinese entrepreneurial spirit. By reformulating Weber’s argument concerning culture and economy, this important and neglected aspect of Daoism is highlighted.