Born in Xinxian, Henan Province (it belonged to Hubei previously), Xu grew up studying martial arts at the Shaolin Temple for eight years, but left after hearing that his family had troubles and in memory of his learning took the name Shiyou (Chinese: 释友; pinyin: Shìyǒu "friend of Buddhism"), which he later changed to the homophonous Shiyou (Chinese: 世友; pinyin: Shìyǒu "friend of the world").

His deputy in the 25th Division, 9th Corps (which Xu later led) in 1933–36, Chen Xilian,[4] later rose to serve on the Politburo Standing Committee of the Chinese Communist Party during the Cultural Revolution.

Zhang favored consolidating power in Sichuan whereas Mao Zedong wanted to continue on to Gansu and Ningxia, to receive aid from the Soviet Union.

The result was that Zhang's Fourth Front Army was battered by Nationalist and warlord troops, and arrived in Yenan in poor shape in October 1936.

[5] In the first half of 1937, just prior to the formal beginning of the Sino-Japanese War, the purge of Zhang Guotao and his closest officers sparked turmoil within the party.

Cadets of the Fourth Front Army studying at the Counter-Japanese Military and Political University (Kang Da), including Xu, confronted the party leadership over accusations that Zhang was disloyal.

[8] At the end of the war, Xu's forces found themselves in Shanghai, and he became a member of the East China Military and Administrative Committee under Chen Yi and Su Yu.

As the Korean War unfolded, he moved into Shandong (assuming a seat on the local governing committee and the post of Military District Commander), to confront what was thought to be the risk of an American landing on Chinese soil.

[13] Xu and political commissar Wei Guoqing provided protection for Deng Xiaoping in 1976, when the future paramount leader was purged by the Gang of Four following the death of Zhou Enlai.