Macau developed a distinct mode of governance in colonial history compared to typical British or French colonial cities, shaped by its limited self-sufficiency and the relative weakness of its metropole. Rather than directly using urban space as a tool for domination and discipline, the Portuguese-Macau Government tended to employ urban planning and construction as a means of mediating power struggles with the Chinese government and the local Chinese community. This study draws on the approach of niche construction, viewing the colonial city as a unique human ecological system where colonizers and the colonized, as heterogeneous and potentially competitive groups, established coexistence mechanisms through urban practices. In contrast to postcolonial theories that emphasize cultural hybridity and identity formation, this approach focuses on the persistent material practices and the configuration of social positions within colonial relationships. To illustrate how different groups engaged in niche construction within Macau’s urban development, the study adopts the dual lenses of social position and the scope of the actants, revealing how colonizers and the colonized negotiated coexistence under unsolvable differences and inequalities. Through three case studies — the Macau city’s defense fortifications, the port improvement project, and the development of new Chinese neighborhoods — this study examines the reconfiguration of territorial sovereignty and colonial governance as Macau transitioned from a settlement phase to a phase of imperial colonization, alongside the concurrent restructuring of political and social relations between the Portuguese government, the Chinese state, and the local Chinese community. The study finds that the Portuguese-Macau government used economic development discourse as a key mechanism to mitigate colonial conflicts, ultimately leading to temporary and pragmatic alliances between the parties.