Current literature on livelihoods and poverty in the periphery of Mexico City focus mainly on new illegal settlers, overlooking the fact that the poor in pen-urban areas not only move in, but also resided in the area before urban encroachment and therefore have a rural background, with different needs and purposes. This paper examines the transformation of campesinos households' livelihoods on the periphery of Mexico City, by adopting a framework inspired by the Sustainable Livelihoods approach. Evidence collected over a period of six years in three villages in Chalco municipality suggests that campesinos' rural assets (land, crops, animals), along with natural assets (water, soil and air), have become increasingly more undermined as urbanisation progresses, whereas, on the other hand, pen-urbanisation has supported the acquisition of mainly urban assets, such as education, access to primary healthcare services, off-farm employment and access to basic infrastructure and services. Nevertheless, most of the urban assets that campesinos households have acquired have a low functionality, in terms of satisfying their preceding and emerging needs. Hence, campesinos were in a vulnerable position, because they had scarce rural, but also limited urban, assets and, therefore, limited options in selecting strategies for adaptation to the pen-urban environment.
