King Wu of Zhou Dynasty started to confer vassalages after he destroyed Shang Dynasty.
King Wu respected offspring of ancient aristocrats and conferred them as well. Among them there was man called Wen Shu who was a descendent of Emperor Yan. King Wu conferred him in Xu (now Xuchang of Henan Province). Wen Shu later founded State Xu which was then conquered by State Chu in the Spring and Autumn Period (770-476BC). Subjects of State Xu took the state name as their surname and this became one of the chief origins of the surname Xu.
Another origin is attributed to Xu You who lived in the remote Emperor Yao period. He was prominent both by his integrity and talent and Emperor Yao intended to concede the throne to him. But Xu You refused to accept and fled to hide in Maountain Ji. This developed into another branch of the surname Xu.
By People's Daily Online