PurposeThe purpose of this paper is to explore the challenges of transitional shelter provision for internally displaced persons (IDPs) in urban informal settlements. While there has been considerable research on postdisaster transitional shelters, less is known on shelters for IDPs in urban informal settlements.Design/methodology/approachA case study is presented based on field research at the communities in Olaria and City in São Paulo, Brazil. Collection of data included personal communication with the dwellers, surveys and interviews with representatives from Techo, one of the few organizations that provide transitional shelters for IDPs. A review of documents regarding the construction, design and users' adaptation of transitional shelter was also undertaken. Data was analyzed using thematic analysis.FindingsThe study found that Techo's program impacts positively on the nonphysical aspects of shelter, such as physical and mental health, security, household responsibilities and community participation. However, Techo's transitional shelter for IDPs in urban informal settlements and most postdisaster transitional shelters share similar problems. These programs respond to the needs of a small proportion of the affected populations with shelters of minimum quality and low durability.Research limitations/implicationsThis paper is limited to a single case study of the NGO Techo and further case study research is recommended to further develop and validate the study results in other urban development contexts.Originality/valueThis research contributes to describing and understanding the context and the provision of transitional shelters to IDPs in urban informal settlements and impacts in the community. With increasing numbers of IDPs settling in urban informal settlements in many parts of the world, this paper is valuable to policymakers, NGOs and researchers operating in this field to facilitate community development.