The effects of local geology on ground-motion amplification and building damage were studied in the Upper Soča valley (western Slovenia), which was struck by an earthquake ( M LV=5.6) on 12 April 1998 with an epicentre in the Krn mountains. Nakamura's method of microtremor analysis and one-dimensional modelling based on geophysical data (seismic refraction method, seismic velocity measurements in boreholes and DC electrical sounding) were applied in this study. Both methods showed significantly higher amplification in the frequency range of building vulnerability (2–10 Hz) in the Mala vas area of Bovec than in the central part of the town. This finding is consistent with the distribution of the earthquake damage in the area. In Koritnica, large differences in amplification were observed between the eastern rim of the village, built on carbonate bedrock and its central part lying on glacial deposits. In Čezsoča, where the thickness of fluvial deposits is about 20 m, amplifications between 2 and 3 in the frequency range of 2–10 Hz were obtained. In Plužna, which is located on flysch rocks covered with a thin layer of soil, the amplification in the same frequency range was low. In Sp. Drežniške Ravne, one of the most damaged villages during this earthquake, the amplification function has two distinctive peaks at 2 and 10.5 Hz. In Drežnica, however, where only slight damage was reported, the amplification level in the frequency range 2–10 Hz is low. The findings of this study indicate that large differences in damage to the buildings in the Upper Soča valley could be attributed to variations in the thickness and physical properties of Quaternary deposits, which appear to be rather heterogeneous.