The residential sector in Republic of North Macedonia, situated in south-east Europe, is responsible for the consumption of significant amounts of resources and for the production of large amount of emissions and waste. The increased application of wood products can substantially improve these conditions and contribute towards increasing the sustainability in the construction industry and the creation of sustainable homes. The contribution of this paper is the simulation of four different alternatives of residential buildings in the Republic of North Macedonia, evaluated in terms of energy performance and life-cycle assessment for the "cradle to gate" phase. The results of this study revealed that by replacing conventional concrete and masonry constructions with wooden constructions in low-rise family houses, the carbon emissions can be reduced up to 145%. The contribution of this paper is the simulation and analysis of the energy performance by using building performance simulation tools and life-cycle assessment of a residential building and its optimization through several models. The results give significant insight on the influence that the different construction materials have on the environment and buildings performance. Also, the research enables stimulation of the construction industry in utilizing wooden structures and delivering legislation that could increase their use. These actions would provide means for the development of sustainable buildings, neighborhoods and sustainable development of the Republic of North Macedonia.