Thermal insulation is generally installed in the envelope of residential buildings to improve their thermal performance. However, the selection of the optimum insulation thickness requires a detailed thermal energy and economic analysis. This paper determines the optimum insulation thickness for external walls of different composition and orientation, considering both the heating and cooling period and taking into account the wind speed and direction. Three types of composite, thermally insulated walls have been selected. Annual heating and cooling transmission loads are being calculated based on transient heat flow through the external walls and by using hourly climatic data of the city of Athens, Greece. The available wind speed and direction data have been statistically analyzed for the assessment of the prevalent wind directions in the area. An economic analysis, based on the life cycle savings method has been performed for each configuration, various thicknesses of insulation material and different orientations. The optimum insulation thickness for any type of wall and orientation was found to be between 7.1 cm and 10.1 cm. Furthermore, a sensitivity analysis indicates whether changes of the economic parameters affect the optimum insulation thickness. (C) 2013 Elsevier Ltd. All rights reserved.