Urban identity, defined as the dynamic interplay between individuals and their environment, reciprocally shapes each other within the context of unique and defining characteristics of an urban locale. This concept has served as rich fodder for intellectual discourse, yet practical, applied studies have been restricted to local-scale “place identity” or linked to urban preservation and heritage concepts. Such constraints confine the understanding of urban identity to a retrospective view, leaving its contemporaneous and prospective dimensions underexplored. Furthermore, the multi-dimensional nature of urban identity, encompassing social, cultural, historical, and spatial elements, has rendered it a complex phenomenon to define and measure, leading to its neglect in applied studies. In an era when cities face multifaceted challenges ranging from climate change to socioeconomic disparities, understanding and leveraging urban identity becomes more than a matter of civic pride; it is a strategic necessity. Addressing this, our central research question asks: “Can we develop an integrated and dynamic methodology for assessing urban identity that is applicable to various case studies, accounting for its multifaceted nature and constant evolution, and can this methodology steer urban planning and policy decisions?” To answer these questions in detail, this study was divided into two phases. The first phase identifies and examines descriptive and analytical approaches to identity and urban identity, evaluating processes and highlighting key debates, issues, and gaps. The second phase constructs a methodology for assessing urban identity based on insights from the theoretical analysis. Through this research, three main dimensions in urban identity are unveiled: spatial scale, observer, and the dynamic state over time which framed our proposed methodology. By considering these dimensions and categorising components into material and immaterial dimensions, an enriched view of urban identity, capturing its dynamic and evolving nature is reached. Incorporating seven data collection methods, it classifies urban identity into three distinct states: “stable, fragmented, and lost”, enabling strategic interventions to foster favourable transformations. This methodology serves as a tool to address contemporary challenges such as climate change, socioeconomic disparities, and public safety, thereby transforming the traditional understanding of urban identity.