The paper describes the possibilities and consequences of district heating in densely populated urban areas. Special, attention is paid to the applications utilizing subsurface space for production, storage and transmission of heat. The theme is enlightened by certain typical realised projects and case studies of potential ones. Comparisons between ground level and subsurface alternatives are performed concerning their technical, economic and environmental effects. INTRODUCTION It is a necessity for the industrialized world to, save energy and to develop methods to substitute for fuel oil. Rapid rise of energy prices and unsteady availability of oil has forced us to concentrate our efforts on reaching these goals. Traditional technologies are found insufficient and inapplicable to the future situation. New solutions and applications are to be invented, and the old ones developed further, for the whole chain of energy supply system from the primary sources to the end use and for harmless returning of the energy flows and wastes back to the environment. One of the most important energy consumption sectors is the domestic heat supply. It constitutes a remarkable potential for energy savings in many countries. Future will bring radical changes also in this sector, and the trend is towards cheaper energy sources, better efficiency and centralized production of energy. District heating - especially at its advanced stage comprising combined heat and power generation - is an efficient way for long-term energy saving on a large scale. District heating systems offer highest benefits when supplying densely built city areas, but there they face alsosome problems, which are common to all city planning, such as land use and environmental problems. The available space for new service plants and distribution networks in cities is always very limited. The street grounds arein most casesfilled with traversing water mains, sewers, possibly gas pipes, electric and phone cables, and other lines. Especially in these cases the subsurface applications in district heating systems are very recommendable. Sometimes there are purely economic reasons favouring subsurface solutions - especially in connection with large and long-distance heat transmission. The heat production plant should always be placed as near the center of the heat load as possible-. In some cases it is necessary or preferable, for reasons relating to land use, environmental protection, safety, or economy, to place the plant underground. District heating has.any characteristics for the protection of environment and landscape, and the best result is often obtained by reasonable use of underground spaces. In this paper we present the possibilities of district heating for the heating of urban areas, and special attention is paid to the underground applications. First, a short survey on the general characteristics of the district heating is presented, and then the underground applications are described by means of typical examples of realized and projected cases. DISTRICT HEATING District heating is a very suitable method for serving densely populated areas. Its major advantages in energy production are: possibility to utilize cheaper fuels and combined heat and power production environmental protection. In most district heated cities, the heat is mainly produced by combined heat and power plants, and only peak heat demands are covered by water boilers.