The ongoing increase of bicycle traffic in urban areas forces transport authorities to reconsider the space allocation for different transport modes. Transport policies favor the introduction of high-quality bicycle infrastructure along urban corridors to improve the traffic quality and safety for bicyclists but more importantly to increase the attractiveness of bicycling and over vehicular modes. Especially in urban areas with an already established high and steadily increasing share of bicyclists, the introduction of bicycle highways is considered to further alleviate saturated interurban public transport and motor vehicle connections and increase the average traveled distance by non-motorized modes. Due to the expensive implementation costs and the space restrictions in already built-up urban environments, there should be an extensive planning phase for defining the expected changes in traffic efficiency and safety. However, the effects of urban bicycle highways on traffic performance metrics of bicyclists as well as other road users are not thoroughly studied. This paper aims to quantify and assess the potential effects of urban bicycle highway on road users. The study considers a possible inner-city pilot route in the city of Munich, where the present bicycle infrastructure is planned to be upgraded to a bicycle highway. A simulation model is designed using traffic data from field observations and future estimates for the traffic composition. Through microscopic traffic simulation, the potential effects of the introduced infrastructure on road users are determined for different study scenarios. Results show that traffic quality thresholds for bicycle highways, as defined in official guidelines, can only be fulfilled through the implementation of special bicycle traffic control measures such as bicycle coordination or bicycle passage time extension. Finally, unidirectional bicycle highways together with bicycle passage time extension provided the best overall traffic performance for bicycle traffic and motor vehicle traffic.