Abstract Improving the thermal environment of highly urbanized mega cities by optimized blue and green space brings great ecological and social benefits. In this study, applying remote sensing and Computational Fluid Dynamics (CFD) simulation, the Urban Cool Island (UCI) of blue and green space is explored. It indicates that complex outline of faceted water bodies leads to high UCI. Faceted water bodies have stronger UCI than linear ones. The UCI strength ranking of different types of green lands is wedge > radial > punctate > banding. The UCI distribution of green lands are different, which makes them appropriate in specific urban applications. Then, optimized design method of green lands and water bodies to maximize UCI is proposed, including integrating eco-system of green lands and water bodies, limiting riparian development, introducing artificial water within parks, inserting punctate green lands in old districts, setting green bands along roads in direction of prevailing wind and planning wedge green lands on the edge of cities. Finally, according to the optimized design method and the thermal environment simulation of Shanghai, strategy of distribution of blue and green space in urban planning to improve urban thermal environment is formulated, including polishing cool bands beside major and ring roads to increase permeability, inserting cool points into continuous UHI districts, protecting and improving cool surfaces on the edge of cities. The strategy is proved by simulation and provides hints for future planning of urban blue and green spaces.