This study examines how the externalities of Kampung Unggulan Kerupuk Surabaya are viewed from the Islamic Natural Resources and Environmental Economics. Kampung Unggulan Kerupuk Surabaya is a cracker industry located in the urban area but still using traditional methods in the production’s process. This research uses descriptive study case method. The data collection which conducted in this study was by in-depth and direct interviews with research subjects. The analysis technique used in this study was by data reduction, data presentation, and conclusions and results from direct observation from the research’s location. The result of the study shows that there are positive externalities of the existance of Kampung Unggulan Kerupuk Surabaya, such as employment opportunity, increased revenue, and facilities establishment. There are no negative externalities such as environmental pollution, and disruption of society’s health. Environmental management is carried out properly in accordance with the principles of environmental management in Islamic perspective.