In recent decades, the number of refugees in protracted stateless situations has steadily risen. These vulnerable individuals face serious economic and political issues in their host communities. We assessed the common market project in Tanzania’s Nyarugusu refugee camp, examining its impact on refugees’ self-reliance and its role in determining peaceful coexistence between refugees and host communities. Through field research and empirical analysis of original survey data gathered from 473 refugee households and 505 host community households, we demonstrate that use of the common market has increased the incomes of both refugees and host communities. Furthermore, interactions within the common market have improved the relationship between refugees and host communities, bringing deeper trust between them. This study supports the market-based approach targeting refugees and host communities near refugee camps as an alternative to the conventional humanitarian aid methods. This approach could effectively ameliorate prolonged refugee crises around the world, where people suffer from decreasing resources and increasing anti-refugee sentiments.