Cities are increasingly acknowledged as an appropriate governance level to tackle climate change; they both cause and are affected by this global challenge. While the case of sustainable, climate friendly cities in Western democracies has been analysed extensively, experiences from transition countries have received less attention. This article aims to address this research gap. Through the experience of two case studies conducted in Hungary, it identifies why middle-sized cities engage in sustainable energy and climate action. The main drivers are identified as the energy cost reduction related co-benefits derived from energy efficiency improvements, combined with the presence of local political leadership that is committed to sustainable energy and climate action. The role of favourable factors, including the presence of national support programmes for energy efficiency improvement in buildings, EU membership, the joining of national and transnational networks of sub-national governments for sustainable energy and climate action, health and fuel poverty concerns, are explored in the Hungarian context. Barriers to achieving the transition to a low carbon society at the city level are also identified. These include financing constraints combined with high up-front costs of sustainable energy investments, lack of strategic guidance from the national level in terms of climate change and sustainable energy action in cities, and a low level of local public pressure and civil engagement. Areas where local authorities could implement improvements are the development of comprehensive climate change strategies and action plans, including quantified, time-bound targets identifying financing sources and the individuals responsible for implementation, as well as the enhanced integration of climate action with other policy areas.