One of the most striking features in Malaysian cities today is the existence of distinct residential groupings based on ethnic lines. This has heightened after the implementation of the New Economic Policy in 1970, which encouraged the movements of Bumiputras to the cities. This paper attempts a general survey of the process of Malay urbanisation and their increasing residential compartmentalisation. While geographers tend to focus on the socio-spatial dimensions of these processes (where and why), this paper also attempts to see how, as urban entrepreneurialism becomes the norm in development policies, residential compartmentalisation is internalising cohesiveness and yet at the same time resulting in an increasing empowerment and exclusionary closure of urban spaces. These give rise to questions of ethnicity, identity, power and social justice, which are basic notions of urban social sustainability vital to the process of urbanisation in Southeast Asian cities.