The aim of present research is to understand the significance and value of spatial implications of the heritage of the Rapallo border through historical contextualization and contemporary urban theory. The establishment of the Rapallo border in 1920 provided the political basis for the construction of extensive fortification systems on both the Italian and Yugoslav sides. While the Italians built the 1851 kilometer long Alpine Wall defense system, the Yugoslavs built the approximately 250 kilometer long »Rupnik« defense line. The research examined the impact of the Rapallo border on the area and, more specifically, the fortification system of the Rupnik Line on the morphological development of the Žiri settlement. Available historical sources were examined. The missing historical data from the sources were supplemented with the author's personal research (Grom 2018). The research is aimed at understanding the sectoral division of the Rapallo border and the defense systems of the Alpine Wall and the Rupnik Line. Based on archival sources and up-to-date research, the facts that conditioned such a sectoral arrangement in the entire range of the Rapallo border from the tri-border in the north to the Gulf of Rijeka in the south have been established. By examining the existing scientific and professional written sources, and reviewing archival materials, the systemic divisions into sectors of the Italian and Yugoslav defense systems are presented in parallel for the first time. The historical facts that led to the determination of the Rapallo border and its defense systems are researched and presented. With the help of field research carried out in the area of the Municipality of Žiri, locating and recording individual fortifications of the Rupnik line, and conducting interviews, an overview map of these and, until this research, a multitude of uncovered buildings, in the area has been made. The results of the analyses show the multifaceted meaning and influences on the spatial development as a result of the division of homogeneous space. In addition to the obvious negative effects on the local population development, the research shows that the forced dynamics resulting from in-depth territorial defense (Kauffmann & Jurga, 2014) influenced the spatial development of a wider area. The settlements of Žiri and Idrija, and Železniki were taken in comparison with the aim of establishing an overview of development differences in the set time intervals. The established development impetus followed different motives and principles, in Idrija on the Italian side and Žiri and Železniki on the side of the Kingdom of Yugoslavia, and left still visible, different patterns of built space in the area. With the aim of identifying alternative possible spatial development scenarios, a series of simulations of the development of the built space in the Žiri Valley was performed with the establishment of various input conditions and states of space. To perform these simulations, a comparison was made between the settlements of Železniki and Žiri.