While there is an extensive literature on squatter housing and infonnal set tlements, there is at present only a small body of work on infonnal land mar kets. An assessment of the infonnal sector literature and of the basic issue of land as a marketable commodity in general indicates that infonnality in land markets is only partially analogous to the broader concept of infonnality as it is dealt with in the development studies literature. This esysa is an attempt to define the concept of infonnality, specifically in the context of urban land mar kets. I will argue that, unlike the situation in other commodity markets, the use of a dualistic classification of formal and infonnal lands is a valid distinction. After reviewing the existing literature, this paper will examine the effects on policy resulting from the interactions between the various actors in the urban land market system. It is necessary to emphasize from the outset that there is no single, coherent infonnal "sector" of the urban economy, of which land markets are only one part. Rather, there are various types of economic acti vities that may exhibit varying degrees of informality, the system of urban land markets being one of them.