Location for graduation project – Kaunas, Lithuania. Lithuania is one of the countries that have been for 50years a part of the communist bloc. 50 years of central planning and plan economy highly influenced the form of cities, the traditions of spatial planning and the habits of people to use space. After becoming independent, cities went through a complex period of transition from a communist ideology to a free market economy and neo-liberal ways of living. The problems in Lithuanian cities seem to be similar to those in the Western Europe (sprawl, commercialization, car oriented planning) but the context for these problems are very different. The clash of different ideologies can be clearly seen in the communist housing estates in Lithuania. Places do not get enough attention from local authorities and are victims of market led planning. Ironically, places that have been designed under socialist ideology provided affordable housing, social infrastructure and public spaces while new interventions in an independent country are increasing spatial and social fragmentation, allow big scale commercial developments to occupy parks and valuable public spaces, there are only few improvements of existing housing stock, residential areas are surrounded by wide roads with no street life. It is as if ‘the old enemy’ cared about local communities more than current system representing the free society. Research question: What needs to be changed in Local Governance & Spatial Planning in Lithuania in order to achieve sustainable development of cities? To answer this question, a design framework was created under a theme: “Policy by design”. One hand, this thesis is about proposing changes in the policy of planning and governance, on the other, design of a specific place within a chosen theme and scale become an instrument to understand the relationships between all three aspects of planning and identify, where the necessary changes have to be done first. With research, strategic guidelines and design proposals graduation thesis explores, where Lithuanian Spatial Planning policies and governance model went wrong and what are the aspects of it that can be used to get back on track and provide a sustainable future for citizens of Kaunas. In order to achieve sustainable development of cities in Lithuania, local governments have to take the role of guiding the urban development rather than controlling and restricting. First, by adapting a new way of planning that allows for addressing the local needs, is flexible but has restrictions safeguarding from initiatives that are not in the best interest of the public, and is inclusive. Development of the city is a shared responsibility, thus elderships have to gain power from municipality to be included in spatial planning activities, but at the same time, local authorities have to work a lot on capacity building for their personnel, NGO’s and community representatives to ensure an efficient dialogue based on understanding, transparency and informed decision making. Civil society would be strengthened by simply giving a chance to have a say in local decisions. Strong civil society demands for quality, transparency, equity. It redefines what is the public interest in city development is and has capabilities to defend it.