Revision with unchanged content. The Clean Development Mechanism (CDM), one of the flexible mechanisms of the Kyoto Protocol, focuses on two objectives: reduction of Greenhouse gases and contributing to the Sustainable Development (SD) of the host country. In the CDM, hydropower projects represent an important group, with 39 registered projects from 222 in total (20 June 2006). Hydro projects have mostly a bigger impact on social, environmental and economic issues than other CDM projects. In reaction to this challenge, different organisations have expressed their motivation to refer to the World Commission on Dams guidelines for CDM hydropower stations bigger than 20 MW, official recommendations or criteria for Small Scale hydropower facilities, however, are not defined. The thesis shows a lack concerning international and national sustainability guidelines noted for hydropower development and CDM guidelines. Thereby it will be pointed out, that the existing CDM regulations aiming to assure the SD, namely Host Country Approval, and the local and global stakeholder consultation do not perform well. In the second part of the thesis a methodology for SD assessment of CDM small scale hydropower facilities is developed. The thesis aims to support national authorities, project developers and NGO’s concerning the promotion of sustainable CDM hydro projects.