Cities are places of consumption for a variety of consumer products. At the same time, they are places of value creation and provide several potentials for manufacturing companies, as for instance proximities to their customers. With a production site located in urban environment it is possible to fulfill further demands of the urban system besides just providing goods to fulfil the needs of citizens. An urban factory may provide urban functions, such as education, innovation or waste disposal, which are generally provided by city authorities today. As “neighbors,” factories can raise interest and fulfill needs of their urban surrounding actors along the whole life cycle of products manufactured in urban area. In order to make use of the outlined potentials, the product design must be adapted to the demands of the urban environment. For this purpose, it is necessary to identify not only the requirements of customers but also those that arise due to the proximity between the place of production and the place of consumption to fulfill further urban needs. This work aims at developing a design methodology that integrates requirements oriented at fulfilling urban functions into the product design along its life cycle. As a first step, urban functions and needs are identified. Then, the life cycle-oriented design methodology is developed to integrate the functional requirements into the design process. Within the methodology, strategies and design principles are defined for each product life cycle stage in order to fulfill urban functions. A case study is used to apply the methodology and derive specific design strategies as examples.