The paper takes for granted that urban areas - and hence the built environment - may play a catalytic role for effective environmental policy. This position is based on the fact that most residential, production and transportation activities in the developed world take place in urban areas. A major part of the city is shaped by its built environment, but in many research projects and policy initiatives the question of sustainable development of the built environment has not yet been given much explicit attention. Issues like urban architecture, land use in the city, urban life styles and urban rejuvenation have of course extensively been investigated, but a solid methodology in which sustainable environment concepts are intrinsically connected with the quality of the built environment has not yet been developed. This applies in particular to the cultural built heritage. The paper aims to design an operational methodological framework for the assessment and evaluation of alternative urban configurations with a particular view on the socio-economic vitality of urban policy interventions aiming at revitalizing the historical parts of the city on the basis of the concept of environmentally sustainable development. Particular attention will be given to (i) the design and use of an evaluation system for sustainable development of the city and (ii) the use of a multicriteria evaluation methodology for comparing altemative policy options regarding the historical built environment. The methodology will be illustrated by means of a case study undertaken for the Italian city of Bassano, in which various policy interventions had to be judged against the background of long-run development objectives of the city.