To improve energy efficiency and give more access to renewable energy sources, low-temperature district heating (LTDH) is a promising concept to be realized in the future. However, concern about Legionella proliferation restricts applying low-temperature district heating in conventional systems with domestic hot water (DHW) circulation. In this study, a system with decentralized substations was analysed as a solution to this problem. Furthermore, a modification for the decentralized substation system were proposed in order to reduce the average return temperature. Models of conventional system with medium-temperature district heating, decentralized substation system with LTDH, and innovative decentralized substation system with LTDH were built based on the information of a case building. The annual distribution heat loss and the operating costs of the three scenarios were calculated and compared. From the results, realizing LTDH by the decentralized substation unit, 30% of the annual distribution heat loss inside the building can be saved compared to a conventional system with medium-temperature district heating. Replacing the bypass pipe with an in-line supply pipe and a heat pump, the innovative decentralized substation system can reduce distribution heat loss by 39% compared to the conventional system and by 12% compared to the normal decentralized substation system with bypass. •The system of decentralized substations can realize low-temperature district heating without running the risk of Legionella.•Decentralized substations help reduce the distribution heat loss inside the building compared to conventional system.•A new concept that can reduce the return temperature for district heating is proposed and analysed.