Although urban regeneration has been widely seen as a panacea to resolve the multi-faceted problems of cities over the last two decades, a broad section of literature suggests the need for questioning the impacts of urban regeneration projects as an integral part of neo-liberal policies. In the context of Turkey, by focusing on Istanbul, this article aims to investigate the success of the regeneration initiatives in achieving sustainable communities in deprived historic housing neighbourhoods. After defining the interplay between sustainable community, community need and urban conservation, this research examines the recent regeneration experience of Fener and Balat (F&B) -a poor and declining neighbourhood in the historic peninsula of Istanbul-, and discusses the merits and shortcomings, challenges and conflicts of the European Union (EU)-funded regeneration endeavour in developing a sustainable community in F&B, while conserving the urban fabric. Debating on the research findings, the article seeks to underline the crucial issues in creating sustainable communities in the historic housing sites of Istanbul and Turkey. (C) 2010 Elsevier Ltd. All rights reserved.