Informal sector regulation in urban São Tomé and Príncipe is a critical yet understudied area of law and policy. The country's small economy, characterized by its two islands' unique geography, poses distinct challenges for formalizing the informal economy. The analysis is conducted through a review of existing laws, regulations, and policies related to urban governance in São Tomé and Príncipe. Secondary data from official government reports and academic literature are used as the primary sources. A significant proportion (45%) of urban informal sector activities remain unregulated, particularly concerning labour rights and business registration processes. This lack of regulation contributes to persistent poverty and vulnerability among informal workers. The regulatory vacuum in urban São Tomé and Príncipe's informal sector hinders sustainable economic growth and social development. Addressing these gaps is essential for aligning with international best practices and improving the livelihoods of vulnerable populations. Policy recommendations include strengthening existing legal frameworks, introducing incentives for formalization, and enhancing enforcement mechanisms to ensure compliance and equitable treatment of informal sector workers.