The ‘urbanising village’ is a uniquely Chinese urban form that emerged during the period of rapid urbanisation in the reform era. The absence of state governance in rural areas relegates considerable decision-making power to village collectives, and the social capital inherited from traditional rural villages may remain in place after villages are urbanised. To explore the role of social capital and its mobilisation in solving the land use challenges posed by the urbanisation of rural settlements, we analysed the growth processes of Huanggang village as a typical example of a ‘collective-led’ self-organised urbanising village in Shenzhen. Qualitative analysis using semi-structured interviews and abundant secondary data provides credible evidence that defining property rights through land titling is not the only way to achieve orderly development, safe and sanitary living conditions and efficient land use in informal settlements. Social capital, measured by networks, norms and trust passed down among long-term acquaintances in rural villages, plays an important role in the development of communities. Village collectives can unite villagers and mobilise their social, cultural and material capital to compensate for the absence of formal governance institutions and government-provided community services. The implications of these findings suggest a new strategic pathway for managing urbanising villages in China and informal settlements in other developing countries.