At least 200 stalls at Nyayo Market in Ngara were on Sunday demolished by a private developer.
Traders said demolitions started at around 1am.
Nyayo Market secretary Peter Juma said there has been a dispute over the boundary between the market and land set aside for the Urban Renewal Housing project.
Erdemann has been contracted to build houses for the project at Old Ngara.
"We had agreed with the developer (Erdemann company) to meet tomorrow at the DC's office at 9am so that we can get accuracy on the border issue. However, they came at night and demolished our stalls," Juma said.
He said he reached out to Starehe MP Charles Njagua who halted the demolitions.
Njagua called the police and visited the
site to prevent further demolitions.
Traders said they were not given notice to vacate.
A public toilet funded by CDF was among the structures taken down.
County Trade chief officer Frederick Nzioki said he was not aware of the demolition and would comment after getting details.
Erdemann were developers behind the construction of Seefar Apartments in
last year for being near a dam.
However, owners protested and the planned demolition was put on hold pending investigations.
The Urban Renewal project is part of the housing pillar in President Uhuru's Big Four agenda.
The government aims to build 500,000 units within Uhuru's second term.
Employees were to contribute 1.5 per cent of their gross salary towards the project every month, but this was halted after Cotu went to court.
The umbrella trade union said it was unclear how the money was going to be used and that the levy would be an additional burden to taxpayers.
During a roundtable with journalists, , saying Kenyans should look at it as a saving towards home ownership.