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Daylight is essential for ecosystems and for the physical and mental well-being of people. In densely populated cities, only a small proportion of total daylight is available to support urban greenery and most people have little daily exposure to natural daylight. Despite this, many cities have followed a strategy of densification as a way of preventing urban sprawl and reducing energy consumption. In this article, we review the biological importance of daylight and show that urban densification leads to a reduction in the daylight available for both people and nature. We conclude that daylight in cities should be treated as a limiting resource that needs to be planned and managed carefully, much like water or energy. We suggest elements for a policy framework aimed at optimizing urban daylight, including how to determine daylight needs, how to determine the maximum viable urban density, and policy options for built and unbuilt areas.