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A congested intersection is one of the major contributors of traffic delay, air and noise pollution in an urban area. A possible redesign of such an intersection can considerably reduce the above mentioned impacts and therefore achieve environmental and economic profits. The signalized intersection, under examination is one of the most congested in the city of Thessaloniki, located in northern Greece. Within the framework of this study, alternative design infrastructure schemes are proposed and examined through the use of microsimulation techniques. Each scenario consists of the construction of an underground bypass as well as a set of various traffic management interventions. In phase A of the study a full horizontal and vertical alignment study was conducted in order to secure the applicability of the proposed scenarios. In the second phase, the alternative scenarios are evaluated through microsimulation techniques and the software platform AIMSUN was used for traffic simulation. In order to model and calibrate the existing situation, a video of the morning peak hour was recorded followed by additional in-situ measurements. The main traffic indicators that were taken into account for calibration and validation were: the GEH index, the mean section queue length per 15min intervals, the traffic volume per 15 min intervals and the average travel time. In the final phase of the study, the proposed interventions were evaluated by comparing the profits from delay time and air pollutant emissions, with their total cost. Additionally, sustainability is evaluated through a survey targeted on postgraduate students, researchers and professionals.