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This study was conducted against the backdrop of the rapid physical expansion of Kumasi and the concomitant growth of peri-urban settlements of mainly residential land use around the city’s main built-up area. Adopting the case study approach and selecting Abrepo and Esreso as study areas, it sought to understand the factors that inform households’ decisions to live in Kumasi’s peri-urban settlements. Based on households’ likelihood of change of residence in the future and their stated residential location preferences, the implications for sustainable urban growth were examined. The study found that family relations, relatively low land price and house rents as well as work-place proximity were the most significant reasons underpinning households’ choice of the urban periphery. In view of the aggregate cost reducing advantages associated with the urban periphery therefore, the study concludes that rapid expansion of the city into peripheral areas due mainly to residential development will continue to occur. It therefore suggests that urban development policies that aim at securing liveable conditions and promoting mixed-use development in the dominantly commercial central areas of the city will be crucial to managing growth and averting unsustainable urban expansion.