This paper examines the expanding role of the informal sector in rapidly urbanizing cities of the developing world. It explores how formal planning systems struggle to accommodate large-scale rural‑to‑urban migration, resulting in overcrowded settlements, resource shortages, and inadequate public services. As urbanization accelerates, increasing portions of the urban system housing, transport, land use, the economy, social services, and even local governance operate outside formal regulatory structures. Using a case study, the paper assesses whether interactions between formal and informal systems can support the livelihoods of the urban poor and considers how urban planning institutions might strengthen informal sector functioning to improve urban sustainability.