Open AccessThe structural heterogeneity of formal and informal residential and economic spheres in Egypt, as in many countries of the South, continues to increase disparities and aggravate the social and environmental problems of the urban poor. In recent years, a shift has taken place to incorporate local communities as active partners into urban upgrading and development interventions. The following paper will discuss the experience of the Participatory Urban Development Project in Egypt. It tries to identify and demonstrate mechanisms and solutions for the manifold and interrelated problems which could then be applied in other informal areas, too. In doing so, the paper focuses particularly on promoting community participation and multi-actor partnerships without which any attempt to achieve remarkable and sustainable impacts is bound to fail. The paper will give an overview of informal residential development, the institutional framework and the dominant physical and socio-economic features followed by a brief presentation of the strategies, areas of action, potentials and obstacles faced by the project.