Recently, "sustainable development" has become the key concept in the integration of environmental and economic policy. However, little literature considers the links between sustainable development and urban development. This research focuses on these concepts and attempts to develop the term sustainable urban development through an investigation of the "Kampung Improvement Programme (KIP)", and particularly, a case study of Jakarta - Indonesia. The main objectives of the research are to examine the sustainability of KIPMIlT in Jakarta, specifically to analyse the physical, economic, social and environmental characteristics that positively affect urban systems and should be considered as a component of sustainable urban development as a means of improving quality of life and standards of living. The analysis is based on the data collected from two types of kampung areas: improved kampungs and unimproved kampungs. Moreover, each of these have two types of surveys: the household survey which examines the extent of movement of the people to the urban kampungs and their physical, social and economic living conditions; and the leadership survey which examines the extent to which kampungs settlers have participation, opinions, perception and satisfaction in the KIP. The study concludes that the impact of KIP of the kampung study areas in Jakarta has been to improve not only the physical and environment conditions but also the social and economic conditions of the people as a means of increasing the standards of living and improving the quality of life. In considering the implications of these findings on sustainable urban development in Jakarta, it is shown that the KIP has been concerned with the creation of balanced urban development which does not jeopardise future generations. It is based on social, economic, physical and environment activities, and integrated approach among the government, community participation and international agencies.