Territorial stigmatization is one of the most powerful concepts for understanding how social, spatial and symbolic processes are intertwined in producing contemporary urban inequality. Through a detailed case study of Parkdale, a Toronto neighbourhood that has been profoundly shaped by its long association with poverty, single room occupancy housing and psychiatric survivors, this article works at the points of intersection between the rapidly expanding literature on territorial stigmatization and wider social scientific interest in gentrification‐led displacement. Drawing on archival research, participant observation and interviews with residents, it demonstrates how territorial stigmatization, and a new allied concept, territorial destigmatization, operate in Parkdale. Territorial stigmatization and destigmatization work across three dimensions: legal, material and discursive. Using conceptual tools from cultural sociology to foreground symbolic elements of these three dimensions, two strategies of territorial destigmatization are delineated: one that operates in concert with gentrification‐led displacement, and the other that works to symbolically reinscribe stigmatized persons and housing forms. To complement and sharpen territorial stigmatization research, recent findings from studies of stigma are integrated to show how psychiatric survivors and housing advocates in Parkdale use territorial destigmatization to offset gentrification‐led displacement.