Land use planning has been recognised as being crucial in promoting a country’s physical and socio-economic development. A number of commentators have suggested that the process is essential in ensuring that land related activities are developed and organised with due consideration for land use principles which include safety, convenience, efficiency, energy conservation, environmental quality, social equity, social choice and amenity. However, despite such importance, the specific impact of land use planning on the development of human settlements has rarely been explored. The objective of this study was to contribute to the discourse towards unveiling the impact of land use planning on physical development of towns in Ghana. To reach this objective, a cross sectional research design was adopted to inform the selection of the study areas and the generalisation of the study findings. The assessment of the impact of land use planning on physical development of towns was done using a comparison of two communities; New Atuabo and Abonteakoon in the Tarkwa Nsuaem Municipality. Two groups of respondents were used for the study; heads of four institutions and residents of New Atuabo (81) and Abonteakoon (79). A descriptive statistical tool was used in analysing the field data collected through the administration of questionnaire. The study revealed that there is a significant level of difference in the physical development between the planned and unplanned communities. It further demonstrated that, statistically, land use planning has an impact on the development of settlements. Optimising space for housing development and improving households’ access to utilities and socio economic facilities; among others are such impacts of land use planning on the development settlements. The study therefore recommends that, government and other stakeholders should pursue proper land use planning through the preparation and implementation of district spatial development framework, structural plans and local plans for communities without such plans, while people are made to comply with such regulations. Necessary infrastructure should also be provided to make conducive living, in the unplanned neighbourhoods possible.