An increasing number of cities and towns in Europe are facing population decline. In this article we focus on the challenges of this urban shrinkage process from a policy perspective. After a short review of the main causes and consequences of urban shrinkage in Europe, two common public policy responses are identified and evaluated: counteracting shrinkage and accepting shrinkage. Arguing that the latter is the most suitable approach, we recognise that coping with population decline is a complex urban governance process in which citizens inevitably have to play an important role. In shrinking environments, however, people are not always prepared to engage for their community. If policymakers want citizens to care for their community, they must enable them to do so. This may require a rethink of the specific tasks and roles of local government in Europe's shrinking cities and towns.