Timor‐Leste's nation‐building process faces significant demographic challenges because of its current and prospective population dynamics. Based on the 2010 census data this paper projects the demographic structure of Timor‐Leste by 2030 and discusses the impact of the same on peace, development and environmental sustainability. This paper projects that Timor‐Leste's population will increase from 1.06 million in 2010 to 1.82 million in 2030, and because of a slow decline in total fertility rates, its population characteristics will remain that of a very youthful country with an extraordinarily high dependency ratio. Timor‐Leste will have extremely high proportion of excess labour, high concentration of uneducated and jobless youth in small urban areas and an ever‐increasing demand on natural resources in the next two decades. In the context of poor performing domestic economy, very low formal sector employment and weak environmental governance, these challenges may well contribute to social conflict which is evident in the nation's recent past. This paper is an attempt to reflect upon the implications of Timor‐Leste's population dynamics by 2030 on urbanisation, economy (labour market) and the environment which tend to have a strong relationship with social stability.