The aim of sustainable development is to develop economy, but at the same time to preserve the environment. The goal of the research is to work out sustainable development model for Kuldiga municipality. For this purpose the methods of analysis, synthesis, mathematical statistics and system dynamics were used. The complicated system dynamics model will show the possible changes in the future, if we change some input data today. It is a necessary tool for decision making and it will help Kuldiga municipality to make more informed and effective decisions.