For the first time in human history more people live in cities than in the countryside, yet until recently international developmental policies have focused predominantly on rural needs. This chapter discusses the challenges of urban development, particularly urban poverty and inequality, in the context of fast-growing cities in developing countries. Against a background that traces processes of urbanization and urban growth in Africa, Asia and Latin America, the chapter explores the concomitant growth of urban poverty and its particular characteristics. Implications of and responses to urban poverty are explored through policy areas such as access to shelter and basic services, livelihood opportunities and public safety. Policy dilemmas facing city governments are analysed, as are the challenges of implementing urban social policy in contexts where national economic growth and urban needs are not always aligned. Key recent trends in policy that inform a New Urban Agenda are examined, as well as the challenges they present. The chapter concludes that it is incumbent on policy makers and implementers to enhance and herald the contribution of cities to overall development without losing focus on their less fortunate inhabitants.