In this article we argue that the pacification of strategic Rio de Janeiro favelas is a case of what David Harvey calls accumulation by dispossession, allowing for capital accumulation at multiple scales. Drawing on multi-year participant observation, we seek to show the particular form that this process takes as it works through Rio's social and spatial structures. Unlike the mass removals of the 1960s and 1970s, favela families have more recently been displaced through a process of thinning, in the context of a neoliberal development programme centred on a series of mega-events. Removal is carried out through a combination of threats, promises, disinformation, and the intentional generation of insecurity that together constitute a form of psychological terror.