The present paper is focused on the optimization of combined heat and power distributed generation systems. In particular, the authors describe a mixed-integer linear programming model that has been developed in order to optimally design and operate an energy system in a limited urban area where buildings are equipped with small-size CHP plants and are connected by a heat distribution network; in the proposed model a multi-objective function is optimized, since capital and operating costs, as well as CO2 emissions, are taken into account. The model has a general validity even if the results reported in the present paper are relative to the case study represented by a residential and tertiary district in the city of Arenzano in the North of Italy. Furthermore, a comparative study has been done in order to quantify the benefits, in terms of economic saving and CO2 emission reduction, of having a combined heat and power distributed generation system in buildings in spite of using boilers to produce heat and of buying electricity from the grid. (C) 2013 Elsevier Ltd. All rights reserved.