Urbanisation is considered to be one of the most important challenges of the 21st century, affecting also the authorities working with urban heritage conservation. Indicators for sustainable development for Urban Heritage Management have not yet been defined. Administrative methods must be integrated.This report presents the work of the "Sustainable Historic Towns" working group in the years 2001-2002. The background and aims of the working group is presented in the first chapter. The working group was initiated by the Monitoring Group on Cultural Heritage Co-operation in the Baltic Sea States and set up in 2000. The working group will promote preservation and sustainable development of historic towns of the Baltic Sea States by recognising their local identity. The means used are to develop a common strategy, management and good practices for sustainable development in historic towns. Furthermore research activities are encouraged and innovative projects are promoted in participation with national, regional and local authorities, NGOs and other sectors.