This research presents results from a study developing a smartphone app, Urban CoBuilder, in which citizens can collaboratively create designs for urban environments using augmented reality technology and game mechanics. Eight prototypes were developed to refine selected design criteria, including tracking strategies, design elements, user experience and the interface with game mechanics. The prototypes were developed through an iterative design process with assessments and incremental improvements. The tracking was especially challenging and using multiple bitonal markers combined with the smartphone’s gyroscope sensor to average the user position was identified as the most suitable strategy. Still, portability and stability linked to tracking need to be improved. Design elements, here building blocks with urban functions textures, were realistic enough to be recognizable and easy to understand for the users. Future studies will focus on usability tests with larger user groups.