Although much has been written about sustainable development of cities, the debate over the role of small towns as engines in rural development is just beginning to emerge. In the light of the post-recession austerity climate and new a planning period of EU Cohesion Policy it is important to examine the strategic dimensions of sustainable town development. The paper proposes and applies methodology for selecting sustainable development indicators. The study presents a case study of the town Valmiera in North Eastern Latvia. During a stakeholder facilitated indicator selection process 108 indicators from economic, environmental and social dimensions were assessed and filtered leading to a key indicator set of 15. The indicators are grouped according to development themes and reviewed in the light of conceptual and implementation qualities. Review of the sustainable development indicators and the methodology of indicator selection proposed in this publication constitute inputs for creating future based models of sustainable small town development