Exploring the links between urban sprawl and social segregation is an important theme in urban research. Although many studies are available, conclusions are still mixed. This paper contributes to our existing understanding of the impact of sprawl on social segregation, looking at the case of Beijing. The results of the analysis show that sprawling development, characterised by scattered gated communities, low‐density luxury villas, informal development and uneven distributions of public services and transport infrastructures in the peri‐urban regions, have increased residential segregation between low‐income and high‐income residents and between local residents and migrants. Planning policies designed to control urban sprawl and encourage a compact city could have a positive role in reducing social segregation. However, the role of spatial planning is limited as there are still other institutional factors influencing social segregation in China's cities, two of the most relevant here being the remaining hukou system and dual land system.