Wu Huanming, 48, the owner of the two-storey building with a walled, concrete courtyard, wanted the kindergarten to vacate the property when the lease ran out in April, the state-run Xinhua news agency said.
The kindergarten owner, Wu Hongying, 50, wanted to keep the school running until the summer.
Wu Huanming hacked five boys and two girls to death, and also killed Wu Hongying and her 80-year-old mother, before returning home and committing suicide, Xinhua said.
Eleven other children were hospitalised for injuries and a doctor said children as young as three were among the victims.
Wednesday's attack was the sixth on schoolchildren in China since March, prompting calls for more security at schools and raising questions about the social tensions that underlie China's rapid economic changes.
Joseph Cheng, a political science professor at Hong Kong's City University, said the series of attacks did reveal a certain "demonstration or imitation effect".
"But I think the deeper causes are in the process of transforming a socialist economy into a highly-competitive, high-pressure market economy ... there are people who cannot cope," he told Al Jazeera.
|Attacks in China this year
"At the same time corruption, policy abuses, privileges are also serious problems in China, hence you have individuals who feel injustice has been done to them and there are grievances."
The assault occurred despite heightened security countrywide, with gates and cameras installed at some schools and additional police and guards posted at entrances.
China's public security ministry has also vowed a "strike hard" campaign against attackers.
On Wednesday, local media said the authorities had detained several people suspected of harbouring intentions of school attacks, but did not elaborate on their evidence.
Cheng said as a short-term measure the government was on alert and had mobilised the police and probably the grassroots party network to monitor the situation.
'Mental health neglected'
|Police have sealed off the kindergarten where the attack took place [Reuters]
"But in the long term, it shows that mental health is a very serious and much-neglected problem in China's healthcare system," Cheng said.
"There is a chronic shortage of psychiatrists and people usually don't regard mental disturbances as a sickness to be tackled - they simply hide the issue."
Al Jazeera's Melissa Chan, reporting from near the kindergarten in Shaanxi province, said the authorities had also pulled almost all news about Wednesday's attack from local media, in part to prevent copycat killings.
There was a real worry that people were starting to take this route to attract attention to their grievances, our correspondent said.
But there could also be fear of backlash against the government, which was supposed to be protecting schools after the previous attacks.
Cheng said the news blackout might also be an attempt by the authorities to suppress the panic on the part of worried parents.