This article addresses the issue of culture‐led urban regeneration from a Latin American perspective. It argues that, despite limited government intervention, the democratization processes that many cities have undergone have enhanced the potential of urban cultural policy as an instrument to address economic, social and physical decay. Grounded on the cases of Mexico City and Buenos Aires, the article shows how highly contingent and contradictory processes of economic globalization, political democratization and institutional neoliberalization have led to much variation in urban policy. In this context, we argue that urban cultural policy is highly dependent on the intricacies of local configurations of power and the negotiation of policy agendas. As a third level of analysis, the article looks at one paradigmatic project in each city. These experiences reveal that cultural initiatives offer the potential to generate socially inclusive forms of economic and territorial development at both the city and neighborhood scales. Yet we also point out that existing fiscal and political constraints limit the extent to which they can be replicated and articulated into a wider policy agenda. The article ends with a discussion of the comparative findings and a research agenda to examine governmental and non‐governmental culture‐led urban regeneration initiatives.