This article analyses the production of legality and illegality of refugees and how it is experienced, negotiated, and shape young Palestinian and Syrian refugees’ possibilities for development in Jordan and Lebanon. In the two countries, refugees’ legal and illegal statuses are produced in the interaction between national and international security- and economic interests. This article discusses the meanings of development associated with protracted displacement. Despite increased emphasis on moving from a humanitarian approach towards development in long-term refugee situations, the experiences of young refugees in Lebanon and Jordan show that the production of legal status hampers the potential for development. This article analyses young people’s experience of their legal status by addressing the labour of staying legal, the experience of moving in and out of legality and its impact on education and employment. The analysis shows how the production of (il)legality is a subtracting process that leads to debilitation and constrained agency rather than development. In conclusion, this article thus reflects on the problem of using the development discourse with a humanitarian lens and the need for more critical discussion on the meaning of development in protracted displacement.