The Arctic is a platform for scientific, geopolitical, economic, and social initiatives. The Arctic zone is a strategically important territory for both public authorities and the business community, hence we should further the growth of this region taking into account environmentally sustainable development and the latest achievements in the field of digitalization. The purpose of this article is to identify the possibility of developing the Arctic zone through creation of smart cities taking into account the principles of environmentally sustainable development and using digital technologies. The study identifies global environmental problems related to direct human intervention and climate change the Arctic faces. Global warming will accelerate the process of urbanization in the region, which will involve creation of new cities and related infrastructure. To reduce the level of anthropogenic impact in the development of the territory, it is recommended to prioritize construction of smart cities, which, thanks to their high degree of digitalization, should facilitate reduction in environmental problems and in the degree of harm caused by humans. Digital tools and technologies will aid in reducing anthropogenic impacts during urbanization of the Arctic. To improve the efficiency of functioning of smart cities, the following digital technologies should be used in their creation: the internet of things, cloud technologies, distributed ledger technology and others. Even though those are already in use, their application is not comprehensive. Analysis of the world practice of creating and developing smart cities showed that with a high degree of digitalization, they can act as drivers for intensification of development of the Arctic, contributing to reducing the number of environmental problems, which reflects the scientific novelty of the study. Furthermore, analysis of the degree of digitalization of smart cities is important. To this end, it is proposed to use a system of indicators based on the Balanced Scorecard methodology adapted for the purposes of the study. The use of this methodology will allow authorities at all levels to determine priority areas for supporting smart cities, identify and eliminate problems in the field of digitalization and environmentalization of the region, and the business community to effectively invest.