The Colombian Peace Agreement signed in 2016 was saluted internationally by scholars, policy makers and practitioners for encompassing the concept of territorial peace as a means of ensuring local participation in the strengthening of state institutions. Based on engaged research conducted in the Department of Cauca and Bogotá between 2017 and 2020, we critically analyse territorial peace, exploring its ideation, implementation, and subsequent decline in favour of security and stabilisation. We argue that the government’s peacebuilding rationale and mechanisms sought to reinforce the neoliberal state through a constrained participation model, which marginalised the progressive struggles of local communities living in former conflict affected areas. Without a radical breakdown of pre‐existing power structures of exploitation and domination, community participation in peacebuilding runs the risk of legitimising state‐led initiatives that ensure the political rule of capital, strengthen the bureaucracies of the centralised state, and create new violent disputes without resolving existing ones.