Mixed-use zoning — the deliberate mix of housing, civic facilities and commercial areas including retail, restaurants and offices — is a key tool in "smart growth" planning. Mixed-use zoning helps reduce traffic congestion, preserves open space and natural resources, and builds communities. It has also been shown to help revitalize downtown areas and spur economic growth. 

The concept of mixed-use zoning is not new, but it fell out of favor when factories spewed smoke and dust, raising concerns about public health. The concept of single-use zoning has persisted ever since, expressed today in strip malls, supercenters and office parks — all of which depend on automobiles for their economic viability. 

Today much commercial use is relatively benign, and the practice of locating businesses and residential areas in close proximity makes good sense. One caveat: planners and zoning boards must be aware that businesses which use chemical toxins (dry-cleaners using perchloroethylene or any business using industrial solvents), still do not make suitable neighbors in mixed-use environments.

Resources:

The Boston Metropolitan Area Planning Council has produced an excellent ten-page report called "Mixed Use Zoning: A Planner’s Guide." It provides examples of successful mixed-use communities along with clear explanations of the concepts and challenges involved in the process.

The American Planning Association has a "smart growth" division which offers extensive and detailed model Mixed-Use Zoning policies for towns and cities.