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Recent evolutions of the Unmanned Aircraft Systems (UAS) Traffic Management (UTM) concept are driving the introduction of new airspace structures and classifications, which must be suitable for low-altitude airspace and provide the required level of safety and flexibility, particularly in dense urban and suburban areas. Therefore, airspace classifications and structures need to evolve based on appropriate performance metrics, while new models and tools are needed to address UTM operational requirements, with an increasing focus on the coexistence of manned and unmanned Urban Air Mobility (UAM) vehicles and associated Communication, Navigation and Surveillance (CNS) infrastructure. This paper presents a novel airspace model for UTM adopting Performance-Based Operation (PBO) criteria, and specifically addressing urban airspace requirements. In particular, a novel airspace discretisation methodology is introduced, which allows dynamic management of airspace resources based on navigation and surveillance performance. Additionally, an airspace sectorisation methodology is developed balancing the trade-off between communication overhead and computational complexity of trajectory planning and re-planning. Two simulation case studies are conducted: over the skyline and below the skyline in Melbourne central business district, utilising Global Navigation Satellite Systems (GNSS) and Automatic Dependent Surveillance-Broadcast (ADS-B). The results confirm that the proposed airspace sectorisation methodology promotes operational safety and efficiency and enhances the UTM operators’ situational awareness under …