Malaysia has been undergoing rapid industrialization and economic growth, which has led to rapid urbanization since the 1970’s. It is estimated that 72.8% of the Malaysian population will be living in urban areas by 2050. This rapid urbanization will lead to detoriation of quality of life (QOL) of the people if nothing is done. QOL means goodness of life and being able to live successfully and happily. Although the City Plan 2020 of Kuala Lumpur has improving the quality of life of the people as one its visions, there is very little research conducted in Malaysia about Quality of Urban Life. Since the people live in neighbourhoods, this study was undertaken to study the relationship between neighbourhood satisfaction and QOUL. Terrace housing is the most popular choice of housing among the residents of KL, Taman Setiawangsa, a predominantly terrace housing neighbourhood was selected as a case for the study. Extensive literature study of works related to the topic was undertaken before forming the objectives and research requirements. After literature review on the topic it was found that subjective perception study was more appropriate for QOL and neighbourhood satisfaction studies and so such was adopted. The research was based on the hypothesis that QOUL is dependent on overall satisfaction with neighbourhood, which in turn is dependent on overall satisfactions of physical features, social conditions and economic conditions of the neighbourhood. So satisfaction levels of each were to be collected and analysed. A questionnaire survey was undertaken with a sample size of 100 as the primary data of the research. The secondary data was obtained from reports, articles, etc. Different types of data analyses were carried out to obtain different results. Descriptive statistics, correlation matrix analysis and structural equation modeling were employed to test the hypothesis and the results were obtained. From the findings, it was found that the residents were “very satisfied” with the neighbourhood and the overall quality of urban life. The satisfaction with the neighbourhood is most related to the satisfaction with home and satisfaction with QOUL is most related to the satisfaction with economic conditions. It is also found that QOUL is dependent on neighbourhood satisfaction and any modification and neighbourhood satisfaction is in turn dependent on its physical, social and economic features. Any modifications or changes in them will eventually lead to change in QOUL. Recommendations were made from the findings for improving both the neighbourhood satisfaction and QOUL. Finally, suggestions were made for further research on topics related to the subject. Thus, the research fulfilled its aims and objectives and added to the existing knowledge.