Limit a large town’s dimensions (8)
I believe the answer is:
capacity
'dimensions' is the definition.
(thesaurus)
'limit a large town's' is the wordplay.
'limit' becomes 'cap' (capping is a kind of limiting).
'large town' becomes 'city' (a city is a large settlement).
'cap'+'a'+'city'='CAPACITY'
(Other definitions for capacity that I've seen before include "The wherewithal" , "Space -- role" , "Capability to perform or produce" , "A city cap has ability to contain" , "Specified role or position" .)