In Europe compact city policies have become a popular means of planning for sustainability. Dense, compact cities were seen as solutions to reduce the continuing expanding mobility. They are also seen as a way to avoid urbanization of the countryside. Lately planners are expressing their serious doubts about the impact of these positive effects of the compact city concept. Planners in The Netherlands are instead shifting their attention more and more to environmental dilemma's which are partly the result of compact city policies. A number of these dilemma's are caused by frictions between environmentally sensitive and environmentally intrusive functions in a compact urban setting. Traditionally these dilemma's or conflicts were solved by using a functional rationality approach, which means not much more than top-down policy urging local authorities to keep enough distance between conflicting functions. Unfortunately the compact city concept adds an extra dimension to the problem. Keeping distance can therefore no longer be the primary solution to environmental conflicts in urban areas. Environmental conflicts have become -so to speak- more complex due to spatial pressure and due to a number of different interests that have to be taken into account. To solve these complex dilemma's or conflicts functional rationality approaches might not be sufficient any more. Instead of imposing distance as the only option, in The Netherlands, local participation is also recognized as an effective approach in some of the more complex conflicts. This communicative approach is gradually gaining acceptance in The Netherlands and in other parts of the world as a promising approach of dealing with planning issues. In this paper functional rationality will be confronted with communicative rationality, using complexity as the key word to link the two together. This has lead to the following thesis: The most effective solution to urban environmental conflicts will depend on how the complexity of the conflict is regarded. Here, ...