In Brazil, municipal open-air markets (varejões) have become key spaces where rural-urban transitions unfold, not as a linear process of urban encroachment, but as a contested terrain of heterogeneous livelihood strategies, institutional regulation, and everyday agency. Based on 25 in-depth interviews with small-scale farmers and vendors in Piracicaba (SP), this study examines how spatial governance, exercised by the Municipal Secretariat of Agriculture and Food Supply (SEMA), interacts with the realities of peri-urban producers who rely on direct sales to urban consumers. While SEMA’s interventions (e.g., fixed pricing, MEI formalization, standardized infrastructure) aim to “modernize” market operations, they often overlook the diversity of production logics, particularly among organic farmers, family-based producers, and mixed vendors. Farmers report that rigid price controls ignore rising input costs, technical assistance remains generic or absent, and bureaucratic requirements fail to recognize informal yet functional modes of cooperation and value creation. Crucially, “feirantes” (smallholder farmers and resellers who sell agricultural products at open-air markets) are not passive recipients of policy; they actively reinterpret, adapt, and reshape governance through diversification (e.g., organic production, minimally processed goods), informal cooperatives, direct sales networks, and the redefinition of agricultural work as both economic necessity and cultural identity. The paper argues that spatial governance in Piracicaba is neither a success nor a failure, but a continuously negotiated process, contested and co-produced through the agency of those it seeks to regulate. This case reveals a distinctly Brazilian modality of rural-urban transition, where agricultural livelihoods persist not through top-down planning, but through the resilience, creativity, and collective negotiation of small producers navigating the gaps between policy design and lived reality.