The research identified shortcomings in how sustainable development is defined in Australian urban policy frameworks. Weak statutory underpinnings for sustainability and for circular economy thinking result in a continuation of unsustainable urban development patterns. There is limited policy attention to the opportunities provided by the neighbourhood scale. This results in missed opportunities for scale efficiencies of designing for clusters of buildings, infrastructures, and facilities. Due to a reliance on the market to transform urban systems of provision, ‘eco-neighbourhoods’ continue to remain experiments in Australia. Realising sustainable neighbourhoods in urban infill locations is faced with even greater challenges than on greenfield or brownfield sites due to site restrictions and often complex ownership structures. Different policy interventions are required to support sustainable housing at a neighbourhood scale. Much higher regulatory standards for sustainability and Circular Economy (CE) considerations at both building and neighbourhood scale are needed. Policy attention should be directed to mechanisms able to support planning and development at a scale higher than the currently dominant building scale. Additional interventions in fiscal and financial frameworks, business support schemes, and education and training could help with industry transition. The research emphasised the importance of partnerships between governments, private developers, and local communities. It also emphasised the need for suitable governance approaches to realise and manage neighbourhoods and their infrastructures.