The increased demand for renewable energy and the development of energy independent building designs have motivated significant research into the improvement of wind power technologies that target urban environments. However, the implementation of wind turbines in urban environments still faces many challenges. The complexity of wind profile and high turbulence due to the topographical characteristics of urban environments severely limit the performance of urban wind turbines. To explore possible solutions to such challenges and better understand them, the current state of urban wind energy is thoroughly reviewed and the urban flow characteristics are investigated using computational fluid dynamics (CFD). Promising directions that can improve urban wind turbine performance are identified. A flanged shrouded diffuser mechanism - a fluid machine, mounted on rooftop of buildings used as a casing for small wind turbines can significantly improve turbine performance. The fluid machine can increase the wind energy potential by up to a factor of four, by guiding and accelerating the airflow over the building roofs utilizing its geometric features such as, cycloidal curve surface at the inlet and a vortex generating flange at the outlet. The performance of the fluid machine is tested using CFD and wind tunnel tests are also performed. To provide further evidence for its performance, the diffuser mechanism is modeled on the rooftop of an existing building in a test site in Montreal, Canada using CFD and the topographical map including the geometrical data of the buildings in the test site. The CFD analysis performed on the diffuser mechanism in the test site used real statistical wind data of the city of Montreal. CFD investigation of the test site found close agreement with the initially predicted performance of the mechanism. As a power-augmenting device, the fluid machine can mitigate the challenges faced by the urban wind energy systems and it opens new ways to improving energy efficiency of urban wind turbines.