There's a limit of 10,000; that should be plenty and I don't think any current computer can handle that without lag.
Yeah, my computer already started to lag at 1,500 citizens. Every time I placed a house of any kind, the house capacity would go exactly to -1. So i would have to pause the game, go back to the home screen, and then enter the scenario again. But a currently have 3,800 citizens anyways, because the lag still isn't THAT bad. :D