Namibia is undergoing a rapid and major transition from a rural-based society to one based largely in urban areas. This transition is most visible in rapid urban growth, especially in informal settlements that accommodate poor families in shacks on the edges of towns. Namibia's urban areas now have some 140,000 informal houses, a number likely to double over the coming seven or eight years if this trend is not addressed urgently. Similar patterns of rapid, unplanned informal settlement growth are to be seen elsewhere in southern Africa, and in developing countries around the world. The economic, social and environmental costs of informal growth and unplanned urban development are huge for Namibia as a country, and as a society. New forms of poverty and inequality will be entrenched over generations to come if towns fail to develop in ways that facilitate the transition from rural to urban society. By many standards, the continuous rapid growth of informal settlements is one of Namibia's biggest development challenges. This article is largely based on results from recent research on informal settlements in Namibia, implemented by Development Workshop Namibia. It provides information about the growth and characteristics of informal settlements in Namibia and describes how local authorities deal with the phenomenon. Based on promising approaches used by some local authorities, the research further makes recommendations on how informal settlement growth could be turned into formal urban growth, contributing towards urban development that is more socially just, economically efficient and environmentally sustainable.