Urban centers are facing the significant problem of rising temperatures caused by climate change and further exacerbated by the urban heat island effect. This results in severe and adverse impacts on human activities and city development. Urban forests are considered a useful component of urban areas for mitigating the urban heat island effect arising from evapo-transpiration and the shading they provide. This paper reviews the mechanisms behind the urban heat island effect and how trees contribute to the energy-water balance of an urban region in order to determine an appropriate energy-water balance model that best represents the micro- and macroclimate of trees in urban environments. In addition, different modeling tools for simulating urban trees and its impact on the urban heat island effect are reviewed. The result indicates that of all the models reviewed (SEB, UT&C, CEB, Cooling Power Model), the SEB model and the CEB model are the more appropriate models for representing energy-water balance in an urban region at the city block scale and the tree scale, respectively. ENVI-met and ANSYS Fluent are two useful modeling tools to research the microclimate of urban trees. ENVI-met has advantages in 3D tree model construction and has an extensive urban material database. On the other hand, ANSYS Fluent is suitable for urban areas in complex windy conditions due to its powerful ability for computational fluid dynamics simulation.