Mexico City has long been known as one of the world’s largest mega-cities. Although, the city’s growth rates have slowed since the 1980s, this process is not manifested evenly in spatial terms. Peripheral municipalities continue to grow at higher rates, including those municipalities in the southern part of the Federal District that contain its remaining conservation land. This growth is largely, but not exclusively, driven by the ongoing search for housing among lower-income households in the form of irregular settlement. Over time, this incremental pattern of settlement expansion has fragmented conservation land and impaired its ecological functioning. Given their role in land use planning with the reintroduction of elected local governments in the Federal District in 1997, this situation has placed municipalities quite literally at the “frontlines” of this planning and sustainability challenge. This paper examines the approach for managing land use regularization processes related to irregular settlement in conservation land adopted by the municipality of Xochimilco in its 2005 urban development plan, with reference to the experience of a specific case study community. Based on a series of interviews with residents and planning officials, the paper documents the highly-negotiated nature of “normative” planning that focuses on mitigating the impact of settlement in the conservation zone rather than stopping it completely. Given the enormous social pressures to access land for housing, the paper concludes that realistic efforts to preserve the remaining conservation land must involve a more comprehensive approach that better integrates environmental and social equity issues within and among municipal and upper-levels of government.