Nowadays, innovations are gaining more and more importance. The European Union (EU) has recognized the value and the positive effects of innovations. Through development goals, various programs, policies and initiatives it encourages and also supports innovations. Also, cities in the EU are increasingly turning to innovative ideas, creating innovations and their implementation as a solution for development challenges and in their daily work and urban development management. The primary goal of cities is to ensure a better quality of life and work for their citizens by providing better health care, public administration, education, a safer and healthier environment and various other facilities. Given that cities focus on people (citizen), a very large number of innovations that the cities create and implements are social innovations that respond to various social needs or solve problems that society faces. That kind of cities are often called smart cities or even innovative cities. One of the ways in which the EU encourages cities to innovate is through a competition for the most innovative city in Europe, better known as iCapital. After the main information about the EU and innovations as the important development factor, this final thesis deals with the important EU programmes, strategies and initiatives that foster innovations. Next part presents definitions of city, smart city and innovation city. Some of the ideas and initiatives launched by cities in the EU and which won in the iCapital competition over the years are presented and compared in more detail. It can be seen how different innovative ideas can have a great impact on the city. An analysis of the European cities winning the iCapital competition proves that innovative ideas implemented in cities meet the needs of the city and its citizens. By implementing such ideas, the city is developing, modernizing, transforming, becoming more environmentally conscious, but also improves the quality of life and work, which leads to greater satisfaction of citizens. Also, the analysis indicates that the support, cooperation and quality communication between the city management and citizens, companies, non-profit organizations and associations, as well as cooperation between different levels of governance are important for the implementation of innovative ideas in the city. The support of the EU has proved to be extremely important for innovations in cities, which should be used in the next programming periods.