The economic and environmental performance of a district heating (DH) system is to a great extent affected by the size and dynamic behavior of the DH load. By implementing energy efficiency measures (EEMs) to increase a building’s thermal performance and by performing cost-optimal energy renovation, the operation of the DH system will be altered. This study presents a systematic approach consisting of building categorization, life cycle cost (LCC) optimization, building energy simulation and energy system optimization procedures, investigating the profitability and environmental performance of cost-optimal energy renovation of a historic building district on the DH system. The results show that the proposed approach can successfully be used to predict the economic and environmental effects of cost-optimal energy renovation of a building district on the local DH system. The results revealed that the financial gains of the district are between 186 MSEK (23%) and 218 MSEK (27%) and the financial losses for the DH system vary between 117–194 MSEK (5–8%). However, the suggested renovation measures decrease the local and global CO2 emissions by 71–75 metric ton of CO2eq./year (4%) and 3545–3727 metric ton of CO2eq./year (41–43%), respectively. Total primary energy use was decreased from 57.2 GWh/year to 52.0–52.2 GWh/year.