The residential development in mountain areas is explored in this paper. The town of Metsovo is used as a case study. The main purpose of this paper is to use remote sensing imagery and GIS for detecting land use changes that have occurred in the study area since 1950. The images were geometrically corrected by the use of ERMapper software and georeferenced in ArcGIS environment, along with other related map data. Changes in constructions and urban expansion were determined using overlay analysis and a series of maps showing these changes was generated. The results obtained from  the study area indicate that the use of this methodology can be further applied to similar cases in mountainous areas.