Urban development in historic and religious cities like Ayodhya requires balancing environmental sustainability, modern infrastructure, and cultural preservation. This study explores the Ayodhya Township Project, a planned 50-acre urban expansion guided by Clarence Stein’s Garden City principles. These concepts emphasize self-sufficient, pedestrian-friendly, and green urban environments. As Ayodhya experiences rapid growth due to tourism and pilgrimage, the project addresses risks of unplanned sprawl and environmental degradation. It proposes a mixed-use, decentralized, and zoned township with green spaces and hierarchical road networks, enhancing mobility and community engagement. Currently in early implementation stages, the project integrates sustainable water systems, renewable energy, and eco-friendly transport, aligning with smart city and climate-resilient goals. Using stakeholder interviews and spatial analysis, the study evaluates the township’s adherence to Garden City ideals and identifies areas for policy refinement. Ultimately, it positions Ayodhya’s township as a pioneering model of sustainable, heritage-sensitive development in sacred urban centres.