The present work deals with an optimization model for selection of optimal heating structure in urban areas also considering the environmental aspects. The optimization model was established in order to facilitate the decision making during selection phase of heat sources locations and defining the boundaries of their action at the pre-design phase of heat supply schemes development of settlements. Within the model is performed comparative analysis between ten heating systems, whereas as leading criteria in the comparison procedure are considered heat load density per unit of area, techno-economic aspects, and environmental impact. The optimization result actually defines the optimal heating system type in regard of the heat load density per unit area. The model provides possibility in defining standard values of heat density indicators, according to which can be assessed the economic feasibility of implementing district heating system for the selected urban area. The less value of heat density in the system, the higher specific costs for generation, distribution, and transmission of heat energy. Further-more, the model is applied and verified for the local urban, infrastructural, technical and environmental conditions of the city of Skopje. The process of determination of optimal heating structure has holistic approach, where, beside techno-economic aspects and feasibility, the environmental aspect of different heating systems is considered as a major factor (threat) in air pollution.