Rapid urbanization, driven by neoliberal ideologies, demands a balanced human–nature relationship to mitigate ecosystem degradation while integrating natural and built environments. Hilly urban regions, such as those in Sanandaj, Iran, exemplify this coexistence, embodying the dialectical interplay between human and natural spaces. This study proposes a theoretical framework for sustainable placemaking in hilly cities by critically re-examining relevant concepts and analyzing the socio-political forces that shape urban ecological systems and placemaking processes. Employing a multi-method approach—combining a theoretical literature review, field observations, stakeholder interviews, and GIS-based spatial analysis with four representative hills as case studies—this research utilizes MAXQDA for qualitative data analysis and ArcGIS Pro for geospatial mapping. The findings reveal two key insights: first, an analysis of land appropriation shows that, of Sanandaj’s 60 hills, 32 are fully developed by the formal sector, 20 are claimed by governmental institutions, 7 by informal residents, and only 1 remains unappropriated. These are categorized into public green spaces, ecological zones, barren lands, and human-altered areas. Second, qualitative interviews with government officials, environmental activists, local residents, and investors indicate that formal power structures prioritize economic development, while communities value the hills’ cultural, spiritual, and recreational roles. These dynamics highlight how unsustainable development and land speculation degrade ecosystems, exacerbate poverty, and reinforce spatial inequality. To address these challenges, this study advocates for a justice-oriented approach that engages local communities in participatory planning to foster sustainable placemaking. Such sustainability extends beyond preservation, positioning hills as spaces for learning and communal well-being, achievable through intergenerational and intersectoral equity and resistance to appropriation by formal and informal powers. Ultimately, this research underscores the potential of equity-based strategies to redefine human–nature relationships and promote resilient, ecologically balanced urban futures.