As part of policies to move towards a more sustainable model of regional industrial development, Japan introduced Eco-towns in 1997. Ten years later, experience is accumulating on how these are applying a systems approach to reducing wastes and energy use, and recycling materials. In 2001, Japan also launched an Industrial Cluster Policy following the international debate on Clusters and Systems of Innovation triggered by Michael Porter's work on clusters in the 1990s. Although Eco-towns are not generally referred to as Clusters, they share the latter's characteristics in requiring thinking in terms of systems and networks between the various parts and players in the system. This paper will thus look at Eco-towns as Industrial Clusters and consider what implications their experience has for the ongoing debate over the value of cluster theory. Since some of METI's Industrial Clusters relate to environmental themes, we can also see to what extent these differ from Eco-towns in the way they apply the systems approach. It appears that Eco-towns exhibit closer correspondence to cluster theory than do Industrial Clusters; but both are better characterized as local Systems of Innovation.