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Innovative development of Arctic regions has insignificant dynamics to withstand the emerging challenges and threats. The initial asymmetry of the economic development of Arctic regions stimulated scientific search and innovative orientation but later financial and economic crises and new development priorities reduced the innovation potential of this macro-region. The condition of the regional innovation system becomes critical for the development of the innovation activity in Arctic cities. The study reveals the current state of digital transformation of the Arctic cities of Yamalo-Nenets autonomous area. Digitalization of the economy, the implementation of the “Smart City” concept focused on socio-cultural interactions creates new opportunities for the innovative development of Arctic cities. The advantage of many arctic cities is the concentration of human potential, infrastructure, specific social and economic practices. It is assumed that Arctic cities may face non-systemic and ineffective digital transformation, so the process should be accompanied by the development of local innovation systems. The concept of “smart people - smart city - sustainable region” is proposed, which implies prior development of the socio-cultural and intellectual potential providing the ability of arctic people to meet the current challenges and ensure a decent future for themselves.