Limit a large town's size (8)
I believe the answer is:
capacity
'size' 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' (I've seen this before).
'cap'+'a'+'city'='CAPACITY'
(Other definitions for capacity that I've seen before include "Ability, volume" , "how much can one take?" , "Ability to contain or accommadate" , "Size of stadium" , "The amount that can be contained, space" .)