Volume limit placed on a large town (8)
I believe the answer is:
capacity
'volume' is the definition.
(capacity is a kind of volume)
'limit placed on a large town' is the wordplay.
'limit' becomes 'cap' (capping is a kind of limiting).
'placed on' says to put letters next to each other (in a down clue, some letters go on top of others).
'large town' becomes 'city' (a city is a large settlement).
'cap'+'a'+'city'='CAPACITY'
(Other definitions for capacity that I've seen before include "Amount that can be held - skill" , "Ability, volume" , "maximum size" , "Maximum amount that can be contained" , "The wherewithal" .)