The growing need for valid assessment procedures of the outdoor thermal environment in the fields of public weather services, public health systems, urban planning, tourism & recreation and climate impact research raised the idea to develop the Universal Thermal Climate Index UTCI based on the most recent scientific progress both in thermo-physiology and in heat exchange theory. Following extensive validation of accessible models of human thermoregulation, the advanced multi-node 'Fiala' model was selected to form the basis of UTCI. This model was coupled with an adaptive clothing model which considers clothing habits by the general urban population and behavioral changes in clothing insulation related to actual environmental temperature. UTCI was developed conceptually as an equivalent temperature. Thus, for any combination of air temperature, wind, radiation, and humidity, UTCI is defined as the air temperature in the reference condition which would elicit the same dynamic response of the physiological model. This review analyses the sensitivity of UTCI to humidity and radiation in the heat and to wind in the cold and compares the results with observational studies and internationally standardized assessment procedures. The capabilities, restrictions and potential future extensions of UTCI are discussed.