Before the current redevelopment began, the waterside area was known as Södra Hammarbyhamnen (roughly South Hammarby Port), a mainly industrial zone which now houses a library and offices.

New plans for most of the Södermalm area Norra Hammarbyhamnen in the early 1990s opened the door for a redevelopment of the entire area around the water expanse Hammarby Sjö. Although Hammarby Sjöstad is located outside the inner-city Stockholm, the design is intentionally urban rather than suburban, with boulevards, clearly defined and architecturally varied city blocks, and commercial spaces in the ground floor of the buildings.