Economic development brings about urbanisation which may result in rapid housing expansion. The health and well-being of communities is often not considered as a priority of urbanisation with the pressure for developing better economies. Sustainability principles in housing developments are perceived to be able to enhance and to improve the quality of living. The approach to sustainability can, however, be interpreted and prioritised differently. Many developing countries such as Malaysia are depending upon industrialisation for the development of their economies. Continuing urbanisation and industrialisation in these countries indirectly creates tensions between the need for a better built environment, and the push for economic growth. One specific phenomena in Malaysia is the introduction of the mixed-use urban neighbourhood, whereby residential development is netsled within the industrial establishments. On one hand, this helps to create job opportunities and improve the local economy. On the other, it creates concerns in the relations to the house planning, and to the well-being of the residents. These have potential exposures to industrial activities that are associated with environmental problems, such as, poor air quality, local temperature increases, and excessive noise levels. This research applied the current international trends of sustainability practices in housing development in searching for the most appropriate strategies for developing sustainable residential-industrial neighborhoods. Cross reference to other countries strategies and experiences can be adaptation for Malaysian conditions. A residential-industrial community in the city of Pasir Gudang Johor, Malaysia, has been selected as a case study in order to examine the perceived problems of indoor environmental quality in such environments. The result of a questionnaire survey and in-situ measurement indicates that they are facing indoor environmental problems. A set of recommendations for housing guidelines which are tailored for local Malaysians conditions have been identified, and have potential for improving the housing development guidelines and policies for mixed-use community living. Comprehensive strategies will need to be developed to achieve housing development sustainability goals. The development of Master Planned Communities (MPC's) is suggested to be appropriate mechanism to developing planning controls. This will ensure the improvement of indoor environmental quality of living in residential-industrial housing developments in Malaysia. It is anticipated that this research will make a positive contribution to developing decision-making procedures that are appropriate to achieving the goals of sustainable housing development in relation to mixed-used residential housing, It is also expected that this research will assist in establishment of a unified national sustainable housing strategy, and in the rationalised adoption of a master planned community approach.