East African Journal of Social and Applied Sciences (EAJ-SAS), pp. 49-58Understanding the extent of the informality of the sector has a profound influence on regulating and transforming the sector in urban settings. Despite the usefulness of understanding how informal is the informal sector in urban settings, very little has been empirically documented on the informality of the informal sector in urban settings in Tanzania. It is against this background that a cross-sectional study was conducted in Morogoro Municipality to analyse the settings and characteristics of the informal sector. The study specifically assessed the informality of the informal sector by analysing the characteristics and settings of the urban informal sector. An index of the score was constructed to measure the informality of the informal activities. A questionnaire was used to collect primary data from 80 respondents obtained through a multistage sampling technique. The findings reveal a higher level of informality from the businesses studied. The findings show that those most involved in the informal sector had low levels of education and no business skills, and generally use family labour, willing to operate businesses at times and locations convenient to customers. The findings further show that 55 % of the informal sector activities obtained capital from owners’ sources, and it was further revealed that 82.5 % of the businesses or activities operating in the informal sector in the selected wards were not licensed and rarely used any machinery. Results further show that 50% of the activities /businesses surveyed were owned by families. The findings further indicate that of the surveyed businesses only 17.5% (95% CI: 15.0 to 19.9) had their businesses falling under low level of informality, 40.0 % ( 95% CI: 37.2 to 43.1) on a medium level of informality and 42.5 % ( 95% CI: 39.5 to 45.9) on the high level of informality. The surveyed businesses in selected wards in Morogoro municipality possessed a variety of characteristics indicating the various levels of informality. The study recommends further studies to assess the informality of the informal sector and the development of appropriate policy responses to accommodate the needs of the informal sector by the local governments.