Over time, the residential areas close to city centres have experienced change in their function and social structure. In Istanbul a functional and social change is also observed, especially in the residential buildings near the historical city centre. This study investigated this process of transformation through a research project conducted in the southern part of the Istanbul Historical Peninsula (old city centre) and documents the recent functional changes in this district. It also considers the role of tourism in the process of inner city transformation. On the basis of the data collected during the study, proposals are forwarded for the future development of the area.