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This paper explores knowledge city and knowledge-based urban development concepts, discusses the principles of a knowledge city, and portrays its distinguishing characteristics and processes. It analyses Melbourne’s knowledge-based urban development experience by scrutinising its initiatives on culture, science, technology and innovation, and policies in urban, economic and social development. The paper also illustrates how the city administration played a key role in developing Melbourne as a globally recognised, entrepreneurial and competitive city. It concludes with arguing Melbourne as an emerging knowledge city, identifying its key success factors, and providing some insights for policy makers of other cities in designing their knowledge-based urban development.