ASP.NET MVC で動的なドロップダウンリストを実装する　http://miso-soup3.hateblo.jp/entry/2013/07/18/141908　で使用したコードです

City クラス

public class City
{
    public int Id { get; set; }
    public string Name { get; set; }
}

CreateAddressModel

  public class CreateAddressModel
  {
      public int? StateId { get; set; }
      public int? CityId { get; set; }
      public SelectList StateSelectList { get; set; }
  }

State クラス

  public class State
  {
      public int Id { get; set; }
      public String Name { get; set; }
      public IEnumerable<City> Cities { get; set; }

	/// <summary>
	/// 県のスタブリストを作成して返します。
	/// </summary>
	/// <returns></returns>
	public static IEnumerable<State> CreateDefaultsState()
	{
		return new List<State>()
              {
                  new State() { Id = 1, Name = "石川県" , Cities = new List<City>()
                      {
                          new City() { Id = 1, Name = "金沢市" },
                          new City() { Id = 1, Name = "七尾市" },
                          new City() { Id = 1, Name = "小松市" },
                          new City() { Id = 1, Name = "輪島市" },
                      }},
                  new State() { Id = 2, Name = "福井県" , Cities = new List<City>()
                      {
                          new City() { Id = 1, Name = "福井市" },
                          new City() { Id = 1, Name = "敦賀市" },
                          new City() { Id = 1, Name = "小浜市" },
                          new City() { Id = 1, Name = "大野市" },
                      }},
                  new State() { Id = 3, Name = "富山県" , Cities = new List<City>()
                      {
                          new City() { Id = 1, Name = "富山市" },
                          new City() { Id = 1, Name = "高岡市" },
                          new City() { Id = 1, Name = "魚津市" },
                          new City() { Id = 1, Name = "氷見市" },
                      }},
              };
	}
}

都道府県もAjaxで読み込む場合の、ビューのコード例

@model DynamicSelectList.Models.CreateAddressModel

@Html.LabelFor(m => m.StateId, "県")
<select 
  data-bind="options: states, optionsText: 'Text', optionsValue: 'Value', value: selectedState,
	optionsCaption: '県を選択して下さい。'">
</select>

@Html.LabelFor(m => m.CityId, "市町村")
<select 
	data-bind="options: cities, optionsText: 'Text', optionsValue: 'Value', value: selectedCitity,
	optionsCaption: '市町村を選択して下さい。', enable: cities().length !== 0">
</select>

<script src="~/Scripts/knockout-2.3.0.js"></script>
<script type="text/javascript">
    $(function() {

    	var createAddressViewModel = {
    		states: ko.observableArray([]),
    		cities: ko.observableArray([]),
    		selectedState: ko.observable(),
    		selectedCitity: ko.observable(),
    		setStates: function () {
    			//都道府県のセレクトリストのソースを設定します
    			$.ajax({
    				type: 'GET',
    				url: '/api/states',
    				dataType: 'json',
    				cache: false,
    				success: function (data) {
    					createAddressViewModel.states(data);
    				}
    			});
    		}
    	};

    	createAddressViewModel.selectedState.subscribe(function (selectedStateId) {
    		//都道府県が変更された時
    		if (!selectedStateId) {
    			createAddressViewModel.cities([]);
    		}

    		$.ajax({
    			type: 'GET',
    			//url: '/api/cities',
    			url: '/api/cities',
    			data: { stateId: selectedStateId },
    			dataType: 'json',
    			cache: false,
    			success: function (data) {
    				createAddressViewModel.cities(data);
    				createAddressViewModel.selectedCitity('');
    			}
    		});
    	});

    	ko.applyBindings(createAddressViewModel);
	    createAddressViewModel.setStates();
    });

</script>