The Jakarta Metropolitan area has experienced urban sprawl. Existing planning processes do not appear to manage sprawl effectively. The aim of this study is to empirically analyse the contribution of spatial externalities on sprawl, and its effect on proximate agricultural land and conservation areas. A residential location choice model incorporating externalities is constructed, and a Tobit panel data analysis is conducted using grid-based land use data. The analysis finds significant empirical evidence regarding the contribution of neighbourhood development externalities to sprawl. Implications for policy are discussed.