The forceful pursuit of inner‐city renewal in Shanghai since the early 1990s has to a great extent achieved spatial modernization, but at the same time it has given rise to increasing conflicts over residential relocation. Using law as a prism through which to examine the dialectic relationship between renewal practices and disputed relocation, this article argues that the series of unprecedented enactments in law that have taken place during this period have both paved the way for real estate market expansion and been a significant source of relocation disputes in Shanghai. Rather than viewing law as simply given and determinate, the article traces the regulatory regime’s codification of property practices as a means of actively responding to the requirements of the real estate market. Under large‐scale renewal practices, residents’ legal rights of ‘return settlement’ (huiban) in inner‐city areas were largely denied in the early 1990s, before being effectively abolished by the adoption of monetary compensation for displacement in the 2000s. The evolving law on property practices has greatly shaped the process of disputed relocation while simultaneously posing a potential challenge to China’s use of law for market‐oriented development.