After the historic review of the formation of the Hungarian capital this paper deals with the detailed description of the functional structure of Budapest. The historic core is delimited by the setting of the city on the Danube terraces. While the medieval part of Buda is preserved in the Castle District, the old Pest on the left bank totally disappeared and was rebuilt in the beginning of the century. It has office, business and residential functions. Both the Buda and the Pest sides have large outer residential belts both of villa and housing estate types, and belts of mixed functions. Finally the recent problems of the large housing developments sited on the outskirts of the town are introduced. Some of them are the neglect of the inner residential areas, the functins and centres in the large satellite housing estates, transportational problems.