This study examines the informal sector in Karachi. 'Informality' is functionally defined as mass of economic activity that takes place either wholly or partially beyond the reach of the state. The research aims to advance our understanding of how a blend of formal and informal economic activity presents state power with significant challenges in ensuring stability. The objective will be to discern the relationship between economic informality and various dimensions of state stability, from ensuring its writ to arranging for its fiscal requirements. This will be done by looking at informality in three main areas: real estate, transport and manufacturing. The study will then make policy recommendations that would encourage greater formalization of the economy.