Risk‐sensitive urban development is an innovative planning approach that can transform the way cities are built in order to face the uncertainties that arise from climate‐induced disaster risks. However, the potential to initiate such a transformative approach has not materialized be-cause of the many underlying issues that need to be understood properly. Therefore, this study conducted a systematic review to gather empirical evidence on the issues and challenges in implementing risk‐sensitive urban development. The study identified forty‐six issues and challenges under seven key themes that need addressing in order to facilitate the desirable transition: trade‐offs, governance, fragmentation and silos, capacity, design and development, data, and funding. The issues and challenges that exist under trade‐offs for negotiating solutions for risk‐sensitive urban development and the governance of multiple stakeholders were identified as the top two areas that need attention in facilitating the desirable transition. This study also revealed that important infor-mation, such as scientific information, hazard and risk information, temporal and spatial infor-mation, and critical local details are not being produced and shared between stakeholders in deci-sion‐making. A profound participatory process that involves all the stakeholders in the decision-making process was identified as the pathway to ensure equitable outcomes in risk‐sensitive urban development.