The Arctic has rapidly urbanized in recent decades with 2 million people currently living in more than a hundred cities north of 65<span classCombining double low line"inline-formula" </span> N. These cities have a harsh but sensitive climate and warming here is the principle driver of destructive thawing, water leakages, air pollution and other detrimental environmental impacts. This study reports on the urban temperature anomaly in a typical Arctic city. This persistent warm anomaly reaches up to 11 K in winter with the wintertime mean urban temperature being 1.9 K higher on average in the city center than in the surrounding natural landscape. An urban temperature anomaly, also known as an urban heat island (UHI), was found using remote sensing and in situ temperature data. High-resolution (1 km) model experiments run with and without an urban surface parameterization helped to identify the leading physical and geographical factors supporting a strong temperature anomaly in a cold climate. The statistical analysis and modeling suggest that at least 50 % of this warm anomaly is caused by the UHI effect, driven mostly by direct anthropogenic heating, while the rest is created by natural microclimatic variability over the undulating relief of the area. The current UHI effect can be as large as the projected, and already amplified, warming for the region in the 21st century. In contrast to earlier reports, this study found that the wintertime UHI in the Arctic should be largely attributed to direct anthropogenic heating. This is a strong argument in support of energy efficiency measures, urban climate change mitigation policy and against high-density urban development in polar settlements. The complex pattern of thermal conditions, as revealed in this study, challenges urban planners to account for the observed microclimatic diversity in perspective sustainable development solutions.