The THI is a five-year project by the local authority which aims to enhance the historic centre of Stromness.
The 2013 SURF Awards for Best Practice in Community Regeneration received more than 50 applications, and the Stromness THI is one of only three to be shortlisted in the Town Centre Regeneration category.
SURF is Scotland's independent regeneration network, with members ranging from local authorities, housing associations and health boards, to small community groups and charities.
Chair of the Council's Development and Infrastructure Committee, Councillor James Stockan, said: "This shortlisting is just one of several accolades we've received over the years for success of the THI in Stromness.
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"It's especially pleasing to have our work recognised by an independent network of this nature - everyone who has contributed should be proud of this achievement."
The Stromness THI has been in effect in the Stromness Conservation Area since July 2009 and is due to finish in June 2014.
An initial £3.56m of funding for the scheme has subsequently secured a total project investment value of £6.25m for the area, while more than 50 property grants have been awarded, as well as £4.8m worth of work to local businesses.
The overall aim of the Stromness THI is to aid the regeneration of the town centre, ensuring economic viability through investment in the built heritage and is funded by the Heritage Lottery Fund (HLF) and other partners, in particular Historic Scotland and OIC.
The HLF funded element is £1.44m and the total for the scheme approx £3.426m.
Other delivery partners in the project are: Orkney College, Visit Orkney, Orkney Tour Guides Association, Construction Skills, Stromness Business Forum, Stromness Academy, Stromness Primary School, Scottish Arts Council.
Winners of the SURF Awards will be announced on 4 December.
(JP/MH)
