Residential mobility refers to adjustments of housing needs made by households in response to changes in family life cycle phases. Households may express dissatisfaction with current housing and neighbourhood environment, relative to their desired needs, characteristics and preferences. Residential mobility involves the actual moving thus implying changes in the neighbourhood composition and structure as the current residents may decide to move out or stay on, while the new residents may move in the neighbourhood. An assessment of the neighbourhood setting can capture residents' views and perceptions of the neighbourhood environment, be it satisfactory or otherwise; and subsequently, residents may decide whether to move out or stay on in the neighbourhood. The paper aims to establish linkages between residents' perceptions of the neighbourhood environment and residential mobility behaviour. Primary data were collected via a questionnaire survey of 589 households in selected neighbourhoods in Penang, Malaysia. Study results show that attributes of neighbourhood environment, neighbourhood interaction and neighbourhood attachment are significantly associated with residential mobility. Residents who expressed satisfaction with their neighbourhood are more likely to stay on, and vice versa. Hence, future housing policy in the country should take into consideration residential mobility behaviours to enhance the neighbourhood quality for the benefits of all residents.