Cities have always been hubs for celebration and festivity, bringing people together to escape temporarily from the mundane nature of everyday routines. Festivals have often been bridges between people and places, linking personal geography with collective experiences and therefore increasingly of interest to cultural geographers. However, festivals also have social, economic and political aspects that are constructed by societal influences of the time and place. This article presents some of the key debates ongoing in academic literature across disciplines to demonstrate the contested role that cultural festivals play in urban settings and suggests that urban geography is critical to developing these debates. It is simply no longer possible to say that festivity is a simple rupture in the mundanity of everyday life of urban citizens; rather, contemporary cultural festivals now often exhibit complex and uneasy tensions between the socio‐economic strategies of commercialized neoliberal cities and the cultural needs of diverse communities to gather and celebrate. By reviewing the development of festivals as part of the urban cultural economy utilising a geographic lens, this article sets out how cultural festivals are now more often employed by cities for marketing, tourism and other socio‐economic benefits. We demonstrate that cultural festivals and cities have an ongoing relationship, which is now mainly commercialized and politicized, and this has diverse impacts on communities, urban spaces and cultural identities.