The project addresses the problem of a more balanced and sustainable urban development, with the wide objective of building a Regional Polycentric Urban System (RePUS) that could contribute to strengthening an emerging Potential Economic Integrating Zone (PEIZ) in Central and Eastern Europe. Focus is given to the role of medium and small cities, and how to create a critical mass to sustain regional development and competitiveness. The project covers the following objectives: (i) identifying the potentials of the regional urban systems including the functional roles and the urban hierarchy in the European spatial context. (ii) identifying the dynamic medium-small cities that could play as potential regional capitals for developing new functional integrating areas. (iii) promoting the linkages between urban centres and rural areas, focusing on the role of the small towns. (iv) promoting urban policy effectiveness and improving the institutional policy capacity within the ongoing decentralisation process.