Even in presence of a dominant factory sector, informal manufacturing sector can play a very vital role in shaping the development profile of a region through its diverse interaction and complementarities with the organised sector. This paper, based on a field survey at the industrial city of Durgapur explores the problems and prospects of informal manufacturing units therein. A gradual shift in composition of this sector is evident, which is mainly in response to changing economic scenario of the region. Appropriate policies for the sector's optimum development should include, among others, well co-ordinated formal-informal linkage and streamlining of credit availability. These steps are likely to bring about integrated development of the region.