This report is dealing with the digital surface model generation from VHR stereo satellite data with the focus on building height and shape extraction. The report provides a theoretical insight into orthorectification methods based on either empirical or rigorous, physical models and the theoretical aspects of digital surface model extraction. The requirement and ideal distribution of ground control points is discussed. In the final part of the report the results of four software packages, ENVI, PCI Geomatica, RSG and Leica Photogrammetric Suite, tested for urban DSM generation, are presented and described. The orthorectification accuracy analyses were done using QuickBird and IKONOS data. The geometrical accuracies of the tested GCP based orthorectification methods have shown that a rigorous physical model gives the best horizontal accuracies and has proven to be stable, whereas RF based models tend to be instable. For the digital surface model accuracy analyses stereo IKONOS data were mainly used. Two datasets were used to perform the tests. One study area is situated in Nairobi where a variety of building types are present, from high-rise buildings to small illegal shacks. The second study area is in Graz, which was mainly chosen because a very detailed reference surface model was available. The five evaluation tests for the Nairobi test area have shown that all tested software packages created DSMs that performed well in at least one of the tests. They all have advantages and disadvantages. Height accuracy as well as clear building shape extraction is of great importance for the use of DSMs in information extraction for settlement analysis and mapping. The highlighted tests are representing these criteria best. Judging them it can be concluded that overall the PCI and RSG software performed best. They should be favoured for DSM extraction. The quantitative accuracy assessment for the test area of Graz has shown that the best vertical estimation results were achieved with the software packages of LPS and PCI followed by RSG. The vertical MAE for built-up and impervious areas was 2.20m for PCI, 2.28m for LPS and 2.55m for RSG respectively. The RMSE was 3.05m, 2.96m and 3.25m respectively. However, the qualitative, visual DSM evaluation has not confirmed the quantitative results. LPS with the best quantitative accuracy created fuzzy building outlines and contains low details in areas with smaller objects. PCI and RSG both produced DSMs with clear building outlines. They both are able to extract high details in areas with small buildings. Besides achieving the largest error in the quantitative analysis due to an erroneous mountain in the North of the test area ENVI also had problems in extracting correct multi-storey buildings outlines in the denser city area. It achieved good visual results with high details for rather small buildings. Two problems have to be addressed to extract building heights from stereo satellite data. First, the object height information has to be derived from the generated DSM. Two methodologies were presented to derive the object height layer: an indirect and a direct methodology. Second, the building outlines have to be delineated and extracted. A possible approach was proposed based on watershed segmentation. The first results of the two tested methodologies are promising. A mean absolute error of 4.53m and 5.97m respectively was achieved when comparing them with reference building heights. Medium-height buildings were estimated well with an approximate error of one floor. Tall buildings are estimated with larger errors of two or more floors. Additionally, a building outline extraction approach based on watershed segmentation and preliminary results were presented. The methodology successfully detected most buildings. However, problems occur where buildings have complicated outlines. ; JRC.G.2-Support to external security