The World Bank has recently redirected its urban policies, moving from a focus raising productivity of the housing sector, to one that encourages ‘sustainable cities’. The expansion of the urban agenda hopes to improve urban governance while also building human capital through poverty alleviation programmes such as squatter upgrading. By promoting the discourse of ‘sustainable city’, the World Bank argues that there has been a redirection of its conceptualization of development from income generation to one based on Amartya Sen’s (1999) concept of development as freedom. However this article argues that rather than a change in direction, the World Bank has used Sen’s writings to expand and diffuse its market orientated ideology. The evaluation of the squatter upgrading programme set up by the World Bank in Salvador da Bahia, Brazil through Sen’s perspective assesses the practical implications of the conceptual shifts of the World Bank while also contributing to the discussions on the application and use of Sen’s writings. Furthermore the paper explores the contradictions and inconsistencies within the World Bank’s policy and practice for the promotion of ‘sustainable cities’.