The purpose of this paper is to review relationship between spatial characteristics of compact city and urban sustainabiliy from system dynamics perspective using causal loop analysis. It has been argued that spatial characteristics of compact city, high population density and mixed land use, are positively related to urban sustainability. However, research results that are not consistent with pros of compact city argument have been accumulated too. It is especially true when spatial characteristics of compact city are examined with regard to each dimension of sustainablility: economic, social, and environmental sustainability. Reviewing each dimension of sustainability with regard to spatial characteristics based on causal loop analysis, this paper provides more clear understanding on relationship between compact city and sustainability. Also this paper provides a base for system dynamics simulation for future study.