Participation has recently been subject to renewed attention and critique in the context of neoliberal urban governance. This is especially relevant in countries where decentralization and democratization in the context of neoliberalism have led to increased promotion of local‐level participation. This article suggests that current critiques of participation’s potential for democratic citizen engagement in a neoliberal context would benefit from further reflection on how participation is implemented in contexts, particularly the global South, where neoliberalism and democracy may be understood differently. Different ‘cultures of engagement’ in specific settings suggest that understandings and practices of participation draw on different traditions, including corporatism and self‐help. This article seeks to add to the debate by exploring the socio‐spatial consequences of participation structures in low‐income neighbourhoods in a provincial Mexican city. Based on qualitative research in two low‐income neighbourhoods in Xalapa, Mexico, it examines how the provisions of the local citizen‐participation framework compare with residents’ experiences of it. Formalized conceptions of participation, framed as involvement in service provision, interact with and shape residents’ activities in developing their neighbourhoods. This has consequences for urban development there, including the reflection and reproduction of social and spatial marginalization.