Although modern prefabricated buildings may offer many advantages, such as a significant reduction in cost and time, improved quality and accuracy in manufacture, easy dismantle and reuse of its components, etc., they have not gained the attention they deserve in the construction market yet. In this paper, a holistic approach for the formation of prefabricated buildings of advanced performance is presented. Within this context, a new, innovative prefabricated building element is developed, designed to exhibit optimized structural, hygrothermal, energy, acoustic, fire and environmental performance. The improved properties of the building element are ensured by the proper configuration of the layers that compose it with respect to the design objectives; for example, in order to support the heat storage and the control of indoor temperatures, the integration of PCMs in the element's layers is investigated. Furthermore, in order to indicate the contribution of the new building element to the sustainability of the overall construction, the performance of a building formulated with the new element is analyzed in terms of energy and environmental behaviour. The new building element and construction system are expected to systemize the prefabricated element's production, leading eventually to the improvement of the building quality, as well as to the reduction of time and cost of building's erection. In parallel, the new certified and optimized building performance will increase the share of prefabricated buildings in the Mediterranean countries, where housing needs are gradually growing, while at the same time, energy efficient and environmentally friendly construction will be promoted.