Local architecture evolved over time through trails and errors enriching humans’ experience and knowledge on how to adapt and adjust his living space with surroundings even in extreme weather conditions. Although, many of indigenous settlements would not provide high or good level of indoor environmental quality according to current built environment standards. However, those dwellings are very good example in some other aspects including serving social life and effectively adapting to surrounding climatic conditions. This research studies the courtyard concept in traditional houses and how it was developed to adhere to various environmental and cultural principles in the old city of Ghadames. The study relies on descriptive and simulative analysis of existing and proposed designs to optimise the use of the courtyard to maximise natural environment like ventilation and provision of human thermal comfort. Improving the environmental performance of the courtyard design came through multi-method of investigation such as measuring and monitoring indoor physical environment inside traditional and modern houses. The majority of locals were saying that courtyard design usually linked to low-income communities despite the space offers many advantages over modern housing designs. The dynamic simulation did not indicate good performance of the courtyard as an isolated unit whereas houses in the old city were highly compact reducing exposure to solar heat. Researchers developed new courtyard design which was tested by DesignBuilder simulation tool considering all measures including compactness ratio and vegetation effect. It was approved that courtyard would be an important design element in modern era and very good results indicating good level of natural light of 2.9% as well as drop of temperature at 28C degrees during daytime. Additionally, the study shed the light on the use of sustainable construction materials which readily available like palm-tree fiber as organic insulation material can be installed in the external envelope with efficient thermal coefficient................ Keywords: .........Environmental design, DesignBuilder, Courtyard and thermal comfort