Urban heat islands aggravated by accelerating climate change present significant threats to human health and economic productivity, increasing energy consumption to maintain human comfort and thus the ecological footprint of cities and their inhabitants. Most Australian capital cities have developed strategies to absorb significant population growth within existing boundaries by promoting a more compact settlement form to limit further urban sprawl, increase the efficiency of infrastructure and reduce transport related greenhouse gas emissions. In the absence of climate sensitive considerations, however, contemporary planning policy disregards the fact that higher urban densities potentially intensify urban heat islands, as evident not only in compact city centres, but also in recent suburban developments. This PhD research demonstrates how the design of neighbourhoods can influence the urban microclimate at local scale, and thus the carbon footprint and liveability of our cities. The study compared the morphology of precincts and streets in relation to air and surface temperatures, with the focus on the modifying effect of individual urban form parameters such as vegetation, street geometry, volumetric building density, and urban surface characteristics. Airborne remote high-resolution thermal and hyper-spectral imaging and Lidar were employed to examine the spatial structure of neighbourhoods and their diurnal thermal patterns across the Sydney metropolitan area. Two flights were carried out at midnight and noon on calm and clear days in August 2012 in conjunction with simultaneous in-situ measurements obtained in automobile transects. Key outcomes include the development of a methodology for automated morphological classification into Local Climate Zones and city-wide thermal mapping based on a combination of remotely sensed data sets. The comparative analysis of local surface heat island magnitudes allows the assessment of a neighbourhood’s vulnerability to urban warming within the context of different urban densities. A statistical analysis quantified individual contributions of derived urban form parameters to air and surface temperature modification at precinct and street scale, including urban canyon geometry, vegetation abundance, surface cover and albedo. The resulting predictive statistical models enable the assessment of the heat island potential of proposed urban developments and scenario modelling of urban warming mitigation strategies in existing neighbourhoods.