Traditionally urban design is perceived, communicated and created using physical and digital media. However, these realms are handled as separate entities, which hinder collaboration, understanding and communication. Collaborative Augmented Reality (AR) systems can integrate these tasks into one media type and allow a different conversation with complex issues. Human Computer Interfaces and Tangible User Interfaces play key role in AR. They allow an engagement with both the real and virtual component of an urban design project. This paper describes an urban design studio that employs AR as medium of collaboration, the theoretical framework of sense of presence, the understanding and the quality of the resulting design.